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Microsoft to cut 7,800 jobs, mostly in phone business

Microsoft is cutting 7,800 jobs, primarily employees involved in its Windows Phone business, and is taking a $7.6 billion write-down related to its Nokia acquisition.
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft is laying off 7,800 people, primarily employees involved with Windows Phone hardware business, officials announced on July 8.

Microsoft also is taking a $7.6 billion write-down related to its Nokia acquisition, plus a restructuring charge of between $750 million to $850 million. Microsoft plans to complete the job cuts largely by the end of calendar 2015 and completely by the end of fiscal 2016, which means June 30, 2016.

Despite that fact, the company is not throwing in the towel on Windows Phone, one of a handful of first-party devices the company makes. (Other Microsoft-made/branded hardware include the Surface tablet line and Surface Hub conferencing system; Xbox gaming console; Microsoft fitness Band; and the coming HoloLens augmented-reality headset.)

Microsoft still plans to make Lumia phones and is pushing ahead with Windows 10 Mobile, its operating system for Windows Phones and small tablets, expected to hit later this year. Microsoft still plans to launch Lumia flagship devices this calendar year. (The rumor is this fall, once Windows 10 Mobile is available.)

Going forward, Microsoft will "in the near term ... run a more effective and focused phone portfolio," said CEO Satya Nadella in an e-mail to employees.

Microsoft will focus its phone efforts on three segments: Businesses, value-phone buyers and flagship phone customers, moving forward.

I'm not sure if Microsoft will continue making its own phones or outsource its manufacturing completely, while still branding its phones as "Microsoft"-made. Right now, Microsoft makes some phones and outsources some of its phone manufacturing. A spokesperson said the company had no comment as to whether or when it would move to an outsource-only model.

Microsoft's move to cut jobs in hardware isn't much of a surprise. During last quarter's earnings call, Nadella told Wall Street analysts that Microsoft needed "to take further action to reduce our costs across devices as we execute on our Windows 10 first-party hardware plans."

Following that statement and an April 10-Q filing that included some serious warnings about the future of the phone handset business Microsoft bought in 2014 for $7.2 billion, a number of company watchers predicted Microsoft might write off some or all of its Nokia acquisition.

Last month, Nadella combined Microsoft's Windows and devices unit into a single group under Executive Vice President Terry Myerson, resulting in the departure of former hardware/devices chief Stephen Elop.

Nadella more recently signaled that Microsoft's senior leadership team was going to have to make some "tough choices. Last week, Microsoft made a couple of those difficult decisions, by getting out of the display advertising business and offloading its Bing Maps data-collection assets to Uber. Those two moves reduced Microsoft's headcount of approximately 118,000 by just over 1,000 people, according to various estimates.

Last year, Microsoft cut 18,000 jobs over a series of multiple waves. The biggest group affected by last year's cuts -- 12,500 employees -- were former Nokia employees that Microsoft acquired when it bought Nokia's handset and services business.But a number of other groups at the company were affected by last year's cuts, too, including Microsoft's Operating Systems Group, Microsoft Research, human resources, finance, sales and marketing and IT.

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