Microsoft’s costly $8bn destruction of Nokia nears its end

25 May 2016

‘We’re getting there’, really Nokia?

Microsoft spent $7.2bn buying Nokia, before announcing impairment charges of $7.6bn on the back of 7,800 job cuts. It’s time to add almost $1bn to that write off, and 1,850 more layoffs, as Microsoft finally gives up the ghost.

Well, that was costly. Close to $8bn spent on wrapping up a business bought only a few years ago is never a good sign. When it happens to a company that provokes such nostalgia among anyone who owned a phone in the early-2000s, it seems worse.

Yesterday (24 May), Microsoft announced it was writing off $950m and cutting 1,850 jobs from the former mobile phone giant Nokia, leaving very few original employees still on the books.

Most of the layoffs will affect employees at Microsoft’s operation in Finland, with 1,350 job losses there and 500 globally – over 20pc of the $950m cost to Microsoft is through severance packages.

The number of Nokia-related layoffs is quite astonishing, after Microsoft took on 25,000 when it bought the company.

“We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” said Microsoft CEO Satya Nadella.

“We will continue to innovate across devices and on our cloud services across all mobile platforms.”

This all leaves huge question marks over the company’s entire smartphone plan, following the relatively surprising success of the Windows Phone 8 not being built upon.

As for Nokia, its name isn’t completely gone, with a last roll of the dice now in the hands of Finnish start-up HMD, which will create Nokia-branded mobile phones and tablets for the next 10 years. That deal made Microsoft a reported $350m.

Meaning its total losses for the Nokia fiasco add up to around €8.25bn.

HMD, however, has no plans to try and launch its own operating system in what is already a pretty solidified market, and has said the new phones will be based on Android. It acquired the naming rights from Microsoft, just in case anyone thought the latter would get back involved anytime soon.

Nokia image via Hardian/Shutterstock

Gordon Hunt was a journalist with Silicon Republic