Microsoft receives brutal criticism for Nokia device acquisition writedown

A Microsoft decision to lay off close to 8,000 staff and take a $7.6 billion (€6.8 billion) hit on its mobile phone business is regarded as tantamout to an admission that the company has failed in the broader wireless hardware market as well as in its bid to keep the Windows operating system (OS) relevant.

The U.S. company last week announced it would lay off 7,800 staff and take the huge impairment charge on "assets associated with the acquisition of the Nokia Devices and Services" business as part of a broader plan to restructure its hardware business. Microsoft said it would also take a restructuring charge of between $750 million and $850 million.

Analysis of the decision has been brutal: Richard Waters from the Financial Times said Microsoft has all but admitted defeat in its attempts to keep Windows OS relevant in the modern tech market. The journalist added that the decision to acquire Nokia's device business--a deal that closed in April 2014--was a "last desperate roll of the dice" by former Microsoft CEO Steve Ballmer to claw back ground on Apple and Google, which dominate the smartphone market with their iOS and Android platforms.

Rory Cellan-Jones, technology correspondent for BBC News, was equally scathing. "The deal now looks like a disaster for all concerned," he wrote, noting that close to 25,000 Nokia staff who transferred to Microsoft as part of the deal "have seen their jobs disappear" in the 15 months since the acquisition was completed.

However, Cellan-Jones noted that Microsoft does not regard the foray into direct smartphone manufacture as disastrous. The U.S. company told him that the Nokia acquisition was the right move at the time, but that it has amended its strategy to keep pace with a rapidly changing smartphone market.

In Microsoft's official announcement of the restructure, current CEO Satya Nadella explained that the company is "moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family."

Nadella added that the company will, in the near term, "run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility."

While Microsoft focuses on reinventing itself, Nokia looks set to make a return to the smartphone market, albeit as a designer of devices that will be produced by third-party ODMs. The Finnish company is also heavily promoting its patent licensing business, and recently signed up South Korean vendor LG Electronics as its first major licensee to the programme since it sold its devices business to Microsoft.

For more:
- see this Financial Times analysis [subscription required]
- read BBC News' view
- view Microsoft's announcement
- see this Nokia announcement

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