The $7.2 billion acquisition of Nokia devices business and downward market conditions have forced software vendor Microsoft to eliminate 18,000 jobs.
The company expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.
Microsoft CEO Satya Nadella said the company will begin to reduce the size of its overall workforce by up to 18,000 jobs in the next year.
Nokia Devices and Services will slash about 12,500 jobs, comprising both professional and factory workers.
Microsoft is moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.
“It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas,” Nadella said.
Microsoft devices plans
Microsoft devices head Stephen Elop said the company plans to consolidate the former Smart Devices and Mobile Phones business units into one phone business unit that is responsible for all of our phone efforts.
Under the plan, the phone business unit will be led by Jo Harlow with key members from both the Smart Devices and Mobile Phones teams in the management team. This team will be responsible for the success of Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the first phone business.
Microsoft said its phone engineering efforts are expected to be concentrated in Salo, Finland (for future, high-end Lumia products) and Tampere, Finland (for more affordable devices). It plans to develop the supporting technologies in both locations.
The company plans to ramp down engineering work in Oulu.
“While we plan to reduce the engineering in Beijing and San Diego, both sites will continue to have supporting roles, including affordable devices in Beijing and supporting specific US requirements in San Diego. Espoo and Lund are planned to continue to be focused on application software development,” said Elop.
It expects to focus phone production mainly in Hanoi, with some production to continue in Beijing and Dongguan. It plans to shift other Microsoft manufacturing and repair operations to Manaus and Reynosa respectively, and start a phased exit from Komaron, Hungary.
“We plan that this would result in an estimated reduction of 12,500 factory direct and professional employees over the next year,” Elop said.