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Microsoft To Cut 7,800 More Jobs, Take $7.6 Billion Writedown On Nokia
jones_supa writes: Microsoft is about to announce another round of layoffs. A company press release confirms the plan, saying that it will target up to 7,800 employees and will be aimed mostly at the hardware division. The hardware division includes the lion's share of former Nokia employees, which became part of Microsoft last year. In an e-mail to employees, chief executive officer Satya Nadella reiterated the company's commitment to its phone business, though he also said that some refocusing was necessary and that Microsoft's phone business would reflect the overall Windows strategy: "We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family," the e-mail reads. "As a result, the company will take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million."
Going from ballmers dominator approach in which all markets become a subservient cash-cow for Microsoft product-driven walled gardens of commerce and perpetual licensing, to "we just want to make it a windows thing" is still completely missing the point. the 7 billion dollar writeoff is the business equivalent of a hangover from 30 years of chasing a white rabbit everyone else had already caught. focusing on windows isnt a business strategy, its a suicide letter.
For what windows does in the real world, other companies already do better and most importantly cheaper. games? steam is a household name. word processing? a google docs enabled chromebook has that covered in spades along with social networking and internet. While microsoft was busy jumping through hoops with zune, windows phone, and surface tablet, they completely ignored the fact that despite competitors dominating a product segment in terms of sales, their competitors had obsoleted the very birthright applications of redmond itself: the apps.
Microsoft has XBox (for now) and a contractual model of business licensing that will assume more and more the role of a monarchy over a colony as time marches on until finally the very same companies that targeted redmonds consumer products will begin to target their business divisions as well. A few more years here and there of fervent litigious hand waving will commence, more layoffs will ensue, and eventually Microsoft will have found itself not consumed 'cancerously' by the open source it vilified, but entirely sidestepped.
Good people go to bed earlier.
... an acquisition which never made any sense
Apple makes an iPhone for about $200, and sells it for about $600, for a gross profit of about $400 per phone.
Google makes no money directly from Android software, and the Android handset makers make a tiny fraction of what Apple makes.
There are HUGE advantages to controlling the entire HW/SW platform. Just because Microsoft screwed it up, doesn't mean it wasn't a good idea. The concept made a lot of sense, but the execution was mismanaged.
Back in 2011 when Elop wrote the burning memo the handwriting was on the wall. Nokia was going to have trouble in the smart phone market. There is no way of knowing if their Linux offering that Elop canned to go with WinMo would have worked out for them. What was obvious even back then, was that moving to WinMo was a mistake. MS had gone from 12% of the smart phone market to under 4% by that point. No one was clamoring for new Windows 7.5 phone. Every Windows 6 phone user I knew had left for Apple or Google by that point in time, fed up random reboots on their phone that took 2 minutes to complete.
It did not help that at that point most of his wealth was invested in Microsoft stock and only a small amount in Nokia stock. It was in his best interest to try and save the Widnows phone. Elop had drank to much kool-aid and was convinced that anything Microsoft was the way to go and coupled with that financial interest he took Nokia in the wrong direction.
The only thing dumber than Elop tanking Nokia was Microsoft purchasing Nokia.
I take that back. Microsoft purchasing Skype was just as dumb. After spending over 9 billion on Skype and then having to upgrade the hardware infrastructure Skype runs on. I suspect Microsoft has another 10 billion or so it will need to write off.
vi +
Your Finance-Fu is weak.
Buy company for $7B
Strip it of it's assets and IP (plus kill a competitor).
Announce a tax write-off of more than you spent.
Result: money back on your tax bill, plus you get to keep the bits you stripped.
They did but keep in mind that it may have cost them far more than 14 billion to start from scratch. The value of Nokia was probably far more than 7B so they got it at a bargain. Spending $7B now could mean billions in savings yearly.
My father before retiring purchased a competitor for $360 000. They had to restructure so they laid off most of the staff which cost them $500 000 in severance. This move increased the company's revenue by over $4 000 000 a year in addition to gaining control of all patents the company owned also removing the need to pay royalties for some of their own products. The ROI was less than a year.
Without seeing all of the financial data behind the purchase it's hard to understand if MS is actually being financially smart or reckless. I'm sure the data is available but I have no idea where to look and even if I did I wouldn't know how to read it properly.
You are so wrong about the Telephony business. If anything, it is an even worse business than handsets. Chinese competition has killed the profit margins. 10 years ago, 3 of the top 5 telco vendors were based out of North America. Lucent, Nortel & Motorola. They have all gone bust and their carcasses have been subsumed by European companies. Similar consolidation has happened in other markets.
What is now the `Nokia' company is the amalgamation of Alcatel, Lucent & Nokia. The big dogs who have any clout left whatsoever are Ericcsson and Hauwei.
I used to work in the industry. Till the late 90s/early 2000s, Telecomm Infrastructure was superhot, and some of the best brains in the world joined these companies. Those days are long gone, the pond has shrunk dramatically and anyone who is halfway decent and motivated has long flown to other companies. The best brains these days are going to Google, Amazon, Facebook etc.
The telecomm industry is now full of former big fish jockeying for position in the ever-shrinking pond. There are several categories of people: the politicians, the option-less and the clueless. The percentage of idiots &/or assholes is very high. As much of the technical work as possible is outsourced to India and China, and the work ethic is mostly `sweatshop'. Engineers in the industry have no bargaining power, salaries are flat or shrinking, and it is brutually hard (if not impossible) to find a job at least in the developed world. Most folks who have had to leave are having to retrain and take jobs in `sister' industries like storage and having their careers reset.
Nowadays, telecomm companies give away the equipment at cost or lower, hoping to make money on support contracts.
I would not wish a career in Telecomm on my worst enemy.