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Cue the multitudes saying they saw this coming: Microsoft has announced that it will be writing off US$7.6-billion its Nokia purchase and will cut 7 800 jobs, primarily in its phone services division.
That US$7.6-billion buyout is likely to make investors pretty nervous, given that Microsoft paid US$7.2-billion for the Finnish phone maker when the deal, first announced in 2013, went through in 2014.
In an internal email sent to Microsoft employees, CEO Satya Nadella says that that having the full Nokia business within its structures is no longer in line with the Redmond-based giant’s strategy:
“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,” he writes. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
According to The Verge, there have been signs that the write-off was coming, with former Nokia head Stephen Elop leaving the company in recent weeks.
At this stage, it’s not entirely clear what Microsoft means by a “more effective and focused phone portfolio”, other than to suggest that the line-up will be much smaller than it was before. One possibility is that Microsoft will cut down on mid-range and low-end devices and focus on premium Windows 10 smartphones.
The company did however confirm that the change is part of Nadella’s wider strategy, which include changes to its engineering team, plans to sell the Nokia HERE mapping division to Uber and the handover of its display advertising unit to AOL.
The move is also unlikely to make Nadella popular among Microsoft employees, given that he’s already cut 18 000 jobs in the past 12 months.