Microsoft has revealed plans to write off the value of the mobile phone hardware business it acquired from Nokia, dramatically scale back its mobile ambitions and cut 7,800 jobs as a result.
The decision to restructure its mobile hardware operations marks the end of an era for Nokia as a handset brand. Once the undisputed leader of the mobile market, Nokia fell behind in the smartphone era. The company sold its handset business Microsoft for $7.4 billion in 2013, to focus on its Nokia Networks and HERE mapping service businesses.
As a result of the restructuring, Microsoft said it plans to record a $7.6 billion impairment charge as well as a $750 million to $850 million restructuring charge.
Microsoft CEO Satya Nadella revealed in a letter to employees that the company is refocusing its effort in mobile phones, and hinted that the company does not plan to exit the hardware business entirely.
“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.”
A source confirmed to Bloomberg that the company still plans to release new handset models, but will scale back to releasing one or two devices per year in each of the three categories of business-focused devices, low-price smartphones and high-end Windows devices.
The company had previously been launching a new model a week when considering variations for geographical markets, the source said.