Microsoft’s signaled and expected goodwill impairment, relating to its previous purchase of the majority of Nokia’s hardware assets, took place this morning — with the software company erasing $7.6 billion from its books.
The firm’s efforts to elbow into first-party hardware have therefore received a massive setback, writing down the vast majority of the purchase price of its phone business. The company has also announced 7,800 layoffs “primarily in the phone business”, and a roughly $800 million restructuring charge. Microsoft declined to comment on the number of remaining staffers it employs as a result of the Nokia deal.
The deal with Nokia, originally pegged at $7.2 billion, did not, it seems, take into account certain amounts of cash and intellectual property. At the same time, that Microsoft has managed to write down more than the originally announced purchase price of the assets in question is somewhat humorous.
So that’s all gone. Microsoft’s phone business has suffered from lower revenue and unit volume than the company originally expected. The Redmond-based company also recently sacked the former head of Nokia, Stephen Elop, whom it (re)acquired from the Finnish company as part of the original transaction.
Microsoft’s CEO, Satya Nadella, said in a public note that he doesn’t “take changes in plans like these lightly,” and that he will host a question and answer session with his denizens tomorrow. The staff cuts come on the heels of Microsoft selling part of its Bing team to Uber, and the transfer of 1,200 staffers to AOL as the firm exits the ad business.
“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. In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility,” Nadella added in an email to staff.
While Microsoft was expected to both take a write down, and perhaps axe staff, the scale of both is perhaps surprising. The company is down a fraction in pre-market trading.
Redmond first swung the axe on Nokia staffers this time last year, when the division bore the brunt of 18,000 Microsoft job cuts (12,500 of those were former Nokia employees). Several swathes of Microsoft layoffs have since followed.