Microsoft will cut 7,800 jobs and take a $7.6 billion impairment charge as it attempts to revive its flagging phone hardware business.
The company paid $7.3 billion for Nokia’s phone business in April 2014, seeking to push rapidly into the smartphone sphere as its traditional software business slowed. Microsoft ultimately wanted to build an ecosystem that made customers that are loyal to a slew of products, much as Apple and Google have done so successfully.
But Microsoft’s Windows Phone system has gained little traction against Apple’s iPhone and Google’s Android system.
Now the company says it will write down more than the entire cost of buying Nokia in the fourth quarter and also take a $750 million to $850 million restructuring charge.
“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family,” CEO Satya Nadella said in a printed statement.
The Nokia deal was made under Nadella’s predecessor Steve Ballmer, who wanted Microsoft to make its own smartphones and tablets.
But Nadella has been moving away from this strategy in order to focus on the company’s core software business and related services.
Last year, he announced a broad restructuring including cutting 18,000 jobs, the biggest round of layoffs in the company’s history. About half of those, 12,500, were jobs associated with the Nokia unit.
He has also warned employees of the need to “make some tough choices in areas where things are not working.”
Other recent moves include handing off some its digital advertising business to AOL and selling its street-image mapping operation to Uber.
Microsoft said it will give more details when it reports fourth-quarter earnings on July 21.
Shares slipped 7 cents to $44.23 in morning trading.