Microsoft (NASDAQ: MSFT) confirmed it has ended negotiations with staff and will close Nokia's (NYSE:NOKIA) former handset product development unit in Salo, Finland. Microsoft also reiterated that it plans to cut 2,300 of its 3,200 employees in the Nordic country, part of a broader restructuring and round of job cuts the software giant announced in July.
In a stock exchange release, Microsoft said it will transfer operations from its Salo plant, which it acquired along with Nokia's devices and services business in 2014, to other locations in Espoo and Tampere, Finland.
Microsoft also said that it will make a final decision on job cuts at its Espoo and Tampere units later on, but will focus on concentrating its product management and product development teams for its phone business at those two sites, according to Finnish broadcaster YLE.
In Espoo, Microsoft employees will continue to work on high-end phones, applications development and design while workers in Tampere will concentrate on mid-range smartphones and the development of key technologies. Besides former Nokia employees, Microsoft also has a sales and marketing team of less than 300 workers in Finland, according to YLE.
Microsoft said in July said it would cut around 7,800 jobs, mostly from its phone business, and record an impairment charge of around $7.6 billion related to its purchase of Nokia's handset business.
After the most recent cuts were announced, Finnish Prime Minister Juha Sipila called Microsoft's decision "a big blow" and visited Salo to hear from local residents on how the government could best help the town, according to Reuters. Towns like Salo, home to one of Nokia's first factories set up in the 1970s, have been hit hard economically as Nokia cut tens of thousands of jobs even before the Microsoft deal.
Ten years ago, Nokia's operations in Salo employed 5,000 workers, according to Reuters. As The New York Times recently reported, policy makers in Finland have been working to try to find new jobs for the thousands of recently unemployed tech workers that Nokia and Microsoft have shed in the country -- and have pressured the companies to offer benefits that could help mitigate the impact of the layoffs.
The cuts Microsoft announced in July were the second major round of job losses the company has made since Satya Nadella took over as CEO in February 2014. In June 2014 Microsoft said it would cut around 18,000 jobs across the company, with 12,500 of those cuts coming from former Nokia workers that Microsoft acquired. Since the deal closed, Microsoft has focused on building entry-level and mid-range Lumia-branded Windows smartphones in a bid to gain global market share, though those efforts have not borne much fruit in terms of share gains.
According to research firm Gartner, Microsoft captured 2.5 percent of the global smartphone market in the second quarter, down from 2.8 percent a year ago. However, according to a recent report from Opera Mediaworks, in countries like India, Indonesia, the Philippines and Vietnam there is a sizable chunk of the population -- around a third or more -- that do not use Android or iOS as their smartphone platform, suggesting that in some markets Microsoft and other platforms are gaining traction.
Nadella has said Microsoft will now focus on building smartphones for three main categories: for business users, entry-level phones for value phone buyers and flagship phones for "Windows fans." Nadella has also said Microsoft will release "premium" phones this year. Yet the company is going to scale back the number of phone models it sells, especially in the entry-level smartphone market, where Microsoft has had the most success.
According to a report from The Verge, which cited unnamed sources, Microsoft will hold a major hardware launch event in October and plans to unveil the high-end Lumia 950 and Lumia 950 XL smartphones.
- see this Reuters article
- see this YLE article
- see this Helsinki Times article
Microsoft sees drop in phone revenue as Nadella pledges more efficiency for entry-level smartphones
Microsoft's Nadella pledges to stick with smartphones, yet sees mobile strategy as broader than phones
Microsoft receives brutal criticism for Nokia device acquisition writedown
Microsoft to slash 7,800 jobs, mostly in phone unit, as smartphone efforts falter
Microsoft devices chief Elop to leave company in executive shakeup