It s official: Microsoft s big purchase of Nokia was a bust. Microsoft announced today it is cutting up to 7,800 jobs as it restructures its phone hardware business. And it s taking a $7.6 billion writedown, which is more than the about $7.2 billion it spent in buying Nokia in a deal that was announced in 2013 and completed last year.
A few years ago, Microsoft and former No. 1 smartphone maker Nokia began working together, hoping their combined might could battle Apple s iPhone and Google s Android. Microsoft in 2011 agreed to pay Nokia $1 billion over five years to install Windows Phone on its handsets, replacing Nokia s Symbian operating system. (Nokia CEO Stephen Elop said then that Nokia had also explored Android, but decided to go with Windows Phone. Alas.) In 2013, Microsoft announced it would buy the Finnish company s mobile phone business outright. Then-Microsoft CEO Steve Ballmer called it a bold step.
But it turned out to be a misstep. Microsoft s Windows Phone continues to struggle against iPhone and Android. According to Gartner s report on global smartphone sales in the first quarter of 2015, Android had 78.9 percent market share, iOS had 17.9 percent and Windows Phone had 2.5 percent — lower than its market share of 3.3 percent when the Microsoft-Nokia deal was announced. The departure of Elop, who joined Microsoft as head of its devices business after it bought Nokia, was announced last month.
The 7,800 job cuts announced today come on top of the 18,000 job cuts Microsoft announced last year, not long after CEO Satya Nadella took the helm. Microsoft had more than 118,000 employees at the end of March, according to the New York Times.
Microsoft shares are up 1.2 percent to $44.83 amid a broader selloff in tech stocks.
Photo, of former Microsoft CEO Steve Ballmer and former Nokia CEO Stephen Elop, courtesy of Nokia.