Microsoft today announced a restructuring plan to simplify its operations and align the recently acquired Nokia Devices and Services business with the company's overall strategy. These steps will result in the elimination of up to 18,000 positions over the next year. Of the total, about 12,500 professional and factory positions will be eliminated through synergies and strategic alignment of the Nokia Devices and Services business acquired by Microsoft on April 25.
"We are 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 month," said Microsoft CEO Satya Nadella to Microsoft employees.
"Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment," says Nadella. Microsoft now plans to share further details about its "innovation investments" on its July 22nd earnings call.
Microsoft Executive Vice President Stephen Elop said that Microsoft would be focused on making the market for Windows Phone. In the near term, the company plans to drive Windows Phone volume by targeting the more affordable smartphone segments, which are the fastest growing segments of the market, with Lumia. Microsoft will also deliver lower-cost Lumia devices by shifting select future Nokia X designs and products to Windows Phone devices.
Microsoft will also continue its efforts to bring tablets to market in ways that complement its OEM partners, power the next generation of meetings & collaboration devices and thoughtfully expand Windows with new interaction models.
"We plan to shift select Nokia X product designs to become Lumia products running Windows," Nadella says in his memo, meaning that Microsoft's Android phones could be largely phased out over time. "This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps."
The cuts follow a recent memo from Nadella, outlining a big shakeup for the software maker and plans to reshape the core of what Microsoft is. Nadella also dropped the devices and services moniker, opting for a focus on cloud and mobile for the future of Microsoft.
Microsoft expected the actions associated with the plan are expected to be substantially complete by Dec. 31, 2014, and fully completed by June 30, 2015.
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.