Microsoft realigns phone business, cuts 7,800 jobs, writes down $7.6 billion

Kip Kniskern

Today Microsoft announced major changes to its phones business, one that it only got into in earnest a short while ago with the acquisition of Nokia’s phones business.  With the the “realignment”, Microsoft will cut some 7,800 jobs, write down some $7.6 billion dollars “related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business in addition to a restructuring charge of approximately $750 million to $850 million”.

Microsoft CEO Satya Nadella emailed the company’s employees, and said:

“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,” Nadella said. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”

The press release shared a few details on the write down:

Microsoft will record a charge in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the NDS business. This charge has no impact on cash flow from operations and is nondeductible for income tax purposes. Based on the new plans, the future prospects for the Phone Hardware segment are below original expectations. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.

The actions associated with today’s announcement are expected to be substantially complete by the end of the calendar year and fully completed by the end of the company’s fiscal year.

Microsoft will reveal more about the changes in their July 21st earnings statement, and in the 2015 Annual Report on SEC form 10-K.  We’ll of course have more as it becomes available.