Microsoft's Layoffs Are Signs of Bigger Things to Come

PHOTO: The Microsoft Corp. logo is pictured outside the Microsoft Visitor Center in Redmond, Wash.

The $7 billion honeymoon is over. Ten months after that pricey acquisition of Nokia's handset business, Microsoft said 12,500 of the 18,000 layoffs will be from the Finnish company it acquired.

It is the biggest layoff in company history.

Satya Nadella, Microsoft CEO for less than six months, is swiftly leading the company to focus on "platform and productivity" from "devices and services," said Norman Young, analyst with Morningstar. This is happening while the company is living in a "mobile-first and cloud-first world," Nadella wrote to employees last week.

Today's announcement is timed ahead of Microsoft's fourth quarter earnings announcement on Tuesday, July 22, when Nadella said he will reveal "further specifics on where we are focusing our innovation investments." Nadella wrote that the company is now reducing the first 13,000 positions, and "the vast majority of employees whose jobs will be eliminated will be notified over the next six months."

PHOTO: Microsoft and Nokia signs are seen in Peltola Oulu, Finland, July 16, 2014.
Markku Ruottinen/AFP/Getty Images
PHOTO: Microsoft and Nokia signs are seen in Peltola Oulu, Finland, July 16, 2014.

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Young said the move was expected, as Microsoft's management already spoke of realizing $600 million of "synergies" from the Nokia acquisition. Young also said the cuts were necessary, as Nadella said in his email to employees today he wants to "become more agile and move faster."

The job cuts do not mean that Microsoft is saying goodbye to its Nokia business. The company launched its latest mobile phone, the Nokia Lumia 635, just two weeks ago. The phone has the latest Windows Phone 8.1 operating system, features of which the company is marketing this year, including digital personal assistant Cortana, a competitor of Apple's Siri.

"[Microsoft] wants to provide the basis (platform) for devices and services alike. While this is an ambitious strategy, we think the foundation already exists through products such as Microsoft Azure, Bing/Cortana, Enterprise Mobility Suite, and Office/Office 365," Young wrote.

The vast majority of the 12,500 Nokia job cuts is a combination of manufacturing, engineering, and other professional employees. Microsoft will be closing down some manufacturing facilities in addition to shutting down some engineering offices that were likely duplicated after the acquisition, Young said.

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