By Shira Ovide
Microsoft Corp. acknowledged what its investors already knew:
The company paid far too much for a struggling smartphone
business.
Chief Executive Satya Nadella said Wednesday that Microsoft
would cut up to an additional 7,800 jobs, and write down by roughly
$7.6 billion the value of its money-losing mobile-phone business,
which Microsoft acquired last year from Nokia Corp. in a deal
valued at $9.4 billion including acquired cash. Microsoft said the
impairment charge and the biggest chunk of the layoffs are related
to the deal.
The Nokia acquisition was a big bet by former CEO Steve Ballmer
that Microsoft could make a successful smartphone business by
combining the hardware and software for mobile devices, as Apple
Inc. does. The impairment charge means Microsoft determined the
mobile-phone operation anchored by its Windows smartphones isn't
worth anywhere close to what the company paid for it.
The charge affects the value on paper of Microsoft's mobile
business, but it doesn't touch the company's hefty $95 billion
stockpile of cash and short-term investments. Wall Street had
expected the charge for months. Microsoft shares were flat in early
trading Wednesday at $44.30.
Mr. Nadella has won high marks inside and outside of Microsoft
during his first 17 months on the job for bucking some
long-standing traditions and efforts to branch Microsoft beyond
Windows.
But he also has presided over two widespread rounds of layoffs
in a year, and the company's mobile business remains a big problem,
with 3% market share of global smartphone units and gushers of red
ink. Mr. Nadella didn't agree to buy the Nokia unit, but his legacy
is on the line if Microsoft can't make more headway among the
mobile devices that increasingly define computing.
Mr. Nadella in a statement Wednesday also said the company would
shift its smartphone strategy, though he was light on details.
"We'll run a more effective and focused phone portfolio business
while retaining capability for long-term reinvention in mobility,"
Mr. Nadella said.
Microsoft said Wednesday that the planned round of fresh job
cuts will result in a restructuring charge of about $750 million to
$850 million.
The cuts would add to the roughly 12,500 former Nokia jobs
eliminated in the past year. Those were part of Microsoft's
largest-ever workforce cuts, announced a year ago at up to 18,000
positions in total. Those job cuts cost Microsoft about $1.3
billion in severance expenses and other reorganization costs.
Chelsey Dulaney contributed to this article.
Write to Shira Ovide at shira.ovide@wsj.com
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