Both the Nokia and aQuantive deals were engineered by ex- CEO Steve Ballmer, who sought to compete against younger, faster-growing tech companies by expanding beyond Microsoft’s original business of making software for desktop computers.
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The job cuts announcement on Wednesday is the second round since CEO Satya Nadella took charge in February 2014.
“Our reinvention will be centered on creating mobility of experiences across the entire device family including phones”, Nadella wrote in an email to employees that sought to explain the latest cuts. While there will still be Microsoft-branded Windows phones, the company is dropping its effort to be on par with Apple or Samsung.
AOL previously used Google to power its search engine.
He says Microsoft will likely focus on showcasing what the operating system can do and at the same time, try to sign up other hardware makers to make Windows Phones.
Microsoft said it also would take a cash restructuring charge of $750 million to $850 million related to the layoffs.
Microsoft executives have been hinting at more cutbacks for months.
Windows Phones have captured less than 3 percent of the smartphone market.
Today’s job cuts also follow Microsoft parting ways with ex-Nokia CEO Stephen Elop and the merge of the hardware and software businesses into a single unit. This number represents roughly 5% of its 118,000 employees. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required. Yet because consumers have shifted more of their time to mobile, it is imperative for Microsoft to remain in the market through a successful Windows 10 launch, said Daniel Ives, analyst at FBR Capital Markets. Nadella doesn’t want to be in the business of mass-producing multiple phones anymore – he wants Microsoft to focus on what it can do well with mobile now and in the future.
Its hopes lie in the idea that a good Windows release would encourage people to use it more, which would in turn lead to more apps for the mobile version.
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In July 2014, when Nadella announced the layoff for 18,000 employees, he initiated what is being termed as the largest of its kind activity in the history of technology companies.
