Microsoft announced its plans today. It will include an impairment and restructuring charge of approximately $950 million in its next financial results, increasing the money it has lost through the acquisition of Nokia’s devices division. Around $200 million of the $950 million total will be set aside for employee severance payments.
The job cuts will largely be at Microsoft Mobile in Finland, where 1,350 people are expected to lose their jobs. An additional 500 people working in the smartphone business worldwide will also be laid off as part of the plans.
Microsoft has struggled to gain momentum in the mobile space. Windows 10 Mobile, the successor to Windows Phone 8, remains unpopular with consumers. The two operating systems combined now account for less than 1 percent of all smartphones worldwide.
Despite its issues, Microsoft reiterated that it remains committed to mobile. The lay-offs do not represent the company exiting the business altogether. Instead, it is refocusing to ensure the division remains effective.
“We are focusing our phone efforts where we have differentiation – with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” said Satya Nadella, Microsoft CEO. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”
Terry Myerson, head of Microsoft’s Windows and Devices group, expressed a similar sentiment in an email to staff that was leaked by Recode. “We’re scaling back, but we’re not out,” Myerson wrote to employees, explaining he wants the group to “be more focused” on the areas where Windows 10 Mobile is truly innovating.
Myerson also confirmed Microsoft has no plans to cease development of Windows 10 Mobile. Current and previous Lumia devices will keep receiving software updates. The company will continue to “develop great new devices” based on Windows 10 Mobile, again emphasizing the platform’s headline features above all else.
Ultimately, the lay-offs are a reflection of Microsoft’s position in the smartphone industry. With less than 1 percent of global market share, the company has been all but defeated by Android and iOS, six years after it first unveiled Windows Phone 7.
Microsoft has previously said it “remains committed” to Windows 10 Mobile but the platform is “not its focus” this year. The company has moved to accept it isn’t going to win consumer favour any time soon, taking a step back to better target the customers who still value its product: businesses, professionals and fans.
The lay-offs should be completed “substantially” by the end of 2017. The remaining jobs will be cut within the next fiscal year, ending July 2017. The company will be providing more information about the charges it will pay in its fourth-quarter earnings announcement next month.
