Microsoft today announced that it set to write off $7.6 billion related to assets associated with the Nokia’s acquisition that was held back in September 2013. The new announcement comes merely a few weeks after the company sacked former Nokia executive Stephen Elop.
Apart from writing off the impairing charge, Microsoft also revealed that it is set to reduce up to 7,800 positions that are “primarily in the phone business” and will record a restructuring charge of somewhere between $750 million and $850 million.
Microsoft is undoubtedly facing huge loss from its Windows Phone business due to domination of Android and iOS in the smartphone market. This was confirmed from the major organisational shakeup that was announced last month. But the company appears to be in development to maintain its market share with restructuring its phone hardware business.
On announcing the new move, Microsoft CEO Satya Nadella said:
“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.”
Microsoft considers that the actions related to the new announcement would be “substantially completed” by the end of this year, and “fully completed” by the end of its fiscal year. However, all the financial adjustments related to the new change will be reflected in the fourth quarter of fiscal 2015.
It is worth noting that the deal which Microsoft’s Steve Ballmer signed with Nokia’s Elop for acquiring Nokia Devices and Services (NDS) business was originally valued at $7.2 billion. But the Redmond giant now claims that an “impairment adjustment” is required at about $7.6 billion.
Microsoft is not cutting off jobs from the phone business for the first time. It laid off 18,000 employees last year on account of Nokia’s acquisition.
The new announcement nowhere means that Microsoft is leaving the smartphone market. It suggests that the company is finally emphasising on building a greater ecosystem rather than just developing new hardware. The ecosystem could be the upcoming Windows 10 which will be available on PCs starting July 29.