Microsoft will cut as many as 1,850 jobs and take a new impairment charge as Chief Executive Officer Satya Nadella pares back the company's ambitions in smartphones.
The company will take a $950 million impairment and restructuring charge, including $200 million for severance payments, Microsoft said in an emailed statement. About 1,350 jobs will be cut in Finland, the base of the handset business it acquired from Nokia Oyj in 2014.
Nadella has already written off most of the $9.5 billion Nokia deal led by his predecessor Steve Ballmer, shifting its Windows phone strategy toward business customers as it struggles to compete with Apple and vendors using the Android operating system. Last July, the company said it planned to cut as many as 7,800 jobs and write down the handset business by $7.6 billion while earlier this month it agreed to sell its feature phone unit.
"We are focusing our phone efforts where we have differentiation," Nadella said in the statement. "We will continue to innovate across devices and on our cloud services across all mobile platforms."
Microsoft expects to complete most of the announced actions by the end of 2016 with further details to be released with fourth-quarter earnings in July. Microsoft sold its feature phone business to FIH Mobile Ltd. and HMD global for $350 million.
Windows phones had less than 1% of the global smartphone market in the first quarter, according to Gartner. That compares with Android's 84% and 15% for Apple's iOS.
The cuts are a further blow to Finland, which is struggling to reduce unemployment and revive an economy hurt by Nokia's mobile-phone demise. Microsoft will be left with a skeletal crew in the country, where Nokia once employed thousands of mobile-phone workers when it dominated global handset sales.
Nadella has been trying to revitalize the company that was once known mainly for personal-computer software by focusing on web-based services and productivity applications. The company is slashing costs and concentrating on Windows 10 to restore growth in PCs.
While Microsoft's push into smartphones hasn't worked out as planned, the company continues to develop hardware such as its Surface tablet computers. Last year, the company unveiled its first laptop.
When Nadella stepped into the helm two years ago, he inherited division over the company's strategy, people familiar with the matter have said. Ballmer had faced significant pushback internally for his plan to acquire Nokia and Nadella was initially against the move into smartphones.
Microsoft had 112,689 employees at the end of last year.
-- Bloomberg News