Microsoft plans to cut up to 18,000 jobs in the next year, with most of those reductions tied to the company’s recently acquired Nokia unit.
The coming cuts, representing about 14% of Microsoft’s employee base, would mark the largest layoff in its history. Microsoft said the cuts are necessary to fulfill its plan to “become more agile and move faster.”
“Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment,” new Microsoft CEO Satya Nadella told employees in a message posted Thursday.
He said the decision will affect about 12,500 jobs in Microsoft’s Nokia Devices and Services unit. On the product end, Microsoft plans to shift “select” Nokia X product designs to become Lumia products running Windows. Today’s Nokia X products, which represent the lower end of the company’s handset lineup, run a version of Android.
“We will be particularly focused on making the market for Windows Phone,” Stephen Elop, Microsoft’s EVP of devices and services, and the former CEO of Nokia, said in an email to employees, also sent Thursday. “In the near term, we plan to drive Windows Phone volume by targeting the more affordable smartphone segments, which are the fastest growing segments of the market, with Lumia. In addition to the portfolio already planned, we plan to deliver additional lower-cost Lumia devices by shifting select future Nokia X designs and products to Windows Phone devices. We expect to make this shift immediately while continuing to sell and support existing Nokia X products.”
Microsoft closed its acquisition of Nokia in April.
Microsoft did not initially spell out how the coming layoffs might affect Microsoft’s Xbox business. In a separate letter sent to employees on July 10, Nadella talked about Microsoft’s commitment to a “mobile-first world,” but also said that Microsoft “will continue to vigorously innovate and delight gamers with Xbox.”
Speaking at the Code conference in May, Nadella said he had no plans to sell off the Xbox business. However, Variety reported Thursday that Microsoft is reconsidering its strategy of developing original series for the Xbox platform. Re/code followed with a report that Microsoft plans to shut down its Xbox Entertainment Studios division, though projects already in production will continue as will the company's plans to create a series about the company's popular Halo gaming franchise.
Update: Microsoft confirmed that it will shut down the division, adding that its app partnerships for TV, entertainment, sports and entertainment content will also not be impacted “in any way and remain an important component of our Xbox strategy.”
Microsoft, Nadella said, is already making plans to cut the first 13,000 positions over the next six months. He will “share further specifics on where we are focusing our innovation investments” on July 22, when Microsoft reports earnings.
Microsoft said the plan will be “substantially complete” by the end of 2014, and fully completed by June 30, 2015. It 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.