Microsoft is set to cut an additional 7,800 jobs at Nokia in an effort to cut costs and shift their business focus from hardware to software and cloud services.
The amount of layoffs makes up seven percent of the workforce, and a write down of about US$7.6 billion (R94.7 billion). Most of the retrenchments will be in the phone hardware business, proving again that Microsoft’s focus is on software. A third of the job cuts will occur in Finland, where Microsoft shut down a product development unit.
This will undoubtedly contribute further to Finland’s economic losses as a result of the decline in Nokia’s business over the last few years.
It’s difficult to believe that Nokia, the giant of mobile and smartphone devices in the late nineties and early 2000s is now struggling to keep its head afloat, but perhaps the partnership with Microsoft may just be what saves the Finland-based mobile corporation.
This will mark the second job cut since Satya Nadella took over as the CEO of Microsoft in February last year. Microsoft paid US$7.2 (R89.7 billion) for Nokia’s handset business last year, which it is expected to write off after showing struggles with the company that now only has a three percent stake in the smartphone market.
Microsoft shares saw a 1.4 percent rise last week, but investors are still concerned about the company’s transition to cloud and software services, and about Nadella’s leadership. However, Microsoft shares have seen an increase of 22 percent since Nadella took over in February of last year. Some of the concerns have raised doubts as to whether the Nokia transition might be contributing to weakening sales of Windows and Office.
Microsoft announced a year ago that they would cut up to 18,000 jobs in an effort to cut costs and become more competitive in the smartphone market. The company had over 118,000 employees globally at the end of March and announced that it would take an up to US$850 million (R10.5 billion) restructuring charge in its fourth quarter which ended on the 30th of June. Ross MacMillan, an RBC Capital Markets analyst, said he expects that the latest job cuts will save the company over US$1 billion (R12.3 billion) on an annual basis.