Almost 3,000 Microsoft employees will lose their jobs as the tech giant plans cut staff over the next year across its smartphone hardware business and global sales division. It’s the latest blow to Microsoft, following on the heels of news in May that 1,850 jobs in its mobile division would be lost.
Widely blamed for the downturn is the company’s purchase of Nokia’s smartphone business in 2015, which resulted in the May staff cut, as most of those workers were employed at the former Nokia facility in Finland.
Microsoft bought Nokia’s devices and services business three years ago for about $7.1 billion. But only months later, Microsoft cut 18,000 jobs, mostly in the phone hardware division, including many of the workers who had joined as part of the Nokia deal. A year later, Microsoft wrote off more than $7 billion resulting from the ill-fated Nokia acquisition, and cut another 7,800 jobs.
Independent technology analyst Jeff Kagan told us the news is “particularly disturbing,” noting that Microsoft’s problems often seem to be self-inflicted.
“Every company has to change direction from time to time,” said Kagan. “Every growth opportunity has a lifespan. It grows, crests then falls. Companies must create the next growth wave before the one they are riding crests and declines. This has happened with countless other companies, including Blackberry, Nokia and now Microsoft.”
But Microsoft’s ventures into wireless via handsets and later with smartphones has been a shift in direction that hasn’t paid off, exemplified by the Nokia blunder, he told us.
“A company like Microsoft acquiring a has-been like Nokia to reignite their growth engines? Really? All Microsoft attempts seem to have failed,” Kagan said. “I don’t know what Microsoft will look like in five or 10 years, but I am concerned to say it mildly.”
In a filing with the U.S. Securities and Exchange Commission, Microsoft said it periodically evaluates how to best deploy the company’s resources, and a recent evaluation led to the job cuts.
“In the fourth quarter of 2016, management approved restructuring plans that would result in job eliminations, primarily across our smartphone hardware business and global sales,” the company said in the filing. The most recent round of 2,850 job cuts is set to be completed by the end of Microsoft’s 2017 fiscal year.
Who Knows Where?
In connection with its restructuring plans, Microsoft incurred restructuring charges of $501 million in fiscal year 2016, including severance expenses and other reorganization costs. The company doesn’t expect to incur additional charges for its restructuring plans in subsequent years.
The company declined to respond to media outlets asking where geographically most of the job cuts will take place, and whether they will apply to departments beyond the company’s mobile hardware division and sales business.
Microsoft currently employs about 114,000 people worldwide. That includes 63,000 in the United States. Of that total, 38,000 workers are in operations, including manufacturing, distribution, product support, and consulting services; 37,000 in product research and development; 29,000 in sales and marketing; and 10,000 in general and administration.