Microsoft to cut jobs at Nokia
Microsoft announced that it would cut 7,800 jobs and take a loss of $7.6 bn on Nokia. Some 2,300 of these job cuts will be made in Finland, where Nokia is headquartered. CEO Satya Nadella said that the company was reassessing its smart phone strategy. The layoffs are expected to reduce the operating expenses by more than $1 billion on an annualized basis.
Microsoft struck a deal with Nokia to buy its handset and service business for $7.2 billion in a move that marks Microsoft's entry into the mobile phone market. The 32,000 employees of Nokia would join Microsoft including Stephen Elop, the former Microsoft employee who headed Nokia. The then CEO of Microsoft, Steven A. Ballmer said that the deal was a "big, bold step forward".
Along with Nokia's devices and services, Microsoft also inherited a non-exclusive 10-year license for Nokia's extensive patent portfolio. Microsoft gained 8,500 design-related patents and 30,000 utility patents and related applications.
Microsoft and Nokia have announced the completion of the acquisition deal. The acquired division will be known as Microsoft Mobile Oy (Oy being Finnish word for company). Nokia said that the final price (not revealed) had been slightly more than the originally announced $7.2 billion. Nokia meanwhile will continue to be a networking company involved in technology development & licensing and online mapping services.
Satya Nadella who became the new Chief Executive of Microsoft in Feb 2014, spearheaded one of the largest layoffs at the company. It was announced that 14% of Microsoft's workforce (that is 18,000 jobs) would be cut down in a period of 12 months. 12,500 of the Nokia workers and 5,500 Microsoft workers will be axed.
Satya Nadella, the current Microsoft head was born in Hyderabad. He joined the growing list of Indian-born executives heading major global corporations, which includes, PepsiCo CEO Indra Nooyi and Deutsche Bank ex-CEO Anshu Jain.
Microsoft's phone hardware division, which consists mostly of assets bought from Nokia, spent so much money on the sales of Windows phone hardware that it actually lost around 12 cents per device sold. In other words, it spent $1.8 billion to sell $1.4 billion of phones. According to industry analysts, a huge write off was to be expected from Microsoft.