NEW YORK CITY — In its largest layoffs to date, Microsoft announced it will cut 18,000 jobs over the next year, 12,500 related to the acquisition of Nokia's handset division. The move consolidates Microsoft's mobile operations, could cost up to $1.6 billion, and will take until the end of the year to complete.
The cuts come as the software giant that built its empire on Windows PCs struggles to carve out a position as a distant third in the rapidly maturing market for smartphones and tablets behind Google's Android and Apple's iOS.
Microsoft CEO Satya Nadella (left) and executive vice president of Nokia Devices & Services Group Stephen Elop share a moment together.
Microsoft CEO Satya Nadella wrote in an email to employees:
The first step to building the right organization for our ambitions is to realign our workforce... We will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change.
As part of what Microsoft called an evolution of its organization and culture, the company will cut both professional and factory positions from its Nokia Devices and Services division. Nadella said the company will have fewer layers of management and extend the scope of managerial responsibility, with the goal of creating "more productive, impactful teams across Microsoft."
Microsoft officials said the company plans to target the affordable smartphone market by pushing Lumia and shifting future Nokia X products to the Windows Phone platform. Following that strategy, Microsoft will consolidate its Smart Devices and Mobile Phones business units into one phone business division, hardware division head Stephen Elop wrote in a memo. The merged team will be led by Jo Harlow with key members from both the Smart Devices and Mobile Phones teams.
Elop said phone production will occur mainly in Hanoi, with some production in Beijing and Dongguan, China. Other manufacturing and repair operations will shift to Manaus, Brazil and Reynosa, Mexico respectively, while the company begins a phased exit from operations in Komaron, Hungary.
Our phone engineering efforts are expected to be concentrated in Salo, Finland (for future, high-end Lumia products) and Tampere, Finland (for more affordable devices). We plan to develop the supporting technologies in both locations. We plan to ramp down engineering work in Oulu. While we plan to reduce the engineering in Beijing and San Diego, both sites will continue to have supporting roles, including affordable devices in Beijing and supporting specific US requirements in San Diego. Espoo and Lund are planned to continue to be focused on application software development.
The majority of layoffs are expected to be complete by December 31, 2014, with cuts fully in effect by June 30, 2015. Microsoft expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.
— Jessica Lipsky, Associate Editor, EE Times