Microsoft Losing Faith on $7.6Bn Nokia “Lumia” Business?

With the announcement on Wednesday that it would cut 7,800 jobs, or nearly seven percent of its workforce, and write down about $7.6 billion related to its Nokia phone business, it appears that Microsoft is losing faith on the business it finalized the acquisition on April 25, 2014.

Microsoft purchased Nokia business for $7.2 Billion hoping to revive the mobile devices making venture, once the toast of consumers.

But on Wednesday according to reports on Reuters, most of the job cuts will be in the phone hardware business, underscoring the company’s shift in focus to software and cloud from hardware.

About a third of the layoffs will be in Finland, where Microsoft will shut down a product development unit, according to Finland’s national broadcaster YLE.

This is the second round of job cuts since Satya Nadella took over as chief executive in February 2014. Microsoft said last July it would slash up to 18,000 jobs.

Nadella has played up Microsoft’s cloud and enterprise software capabilities, but investors have been concerned that the transition to cloud was not offsetting weakening sales of Windows and Office and a bleeding phone business.

Microsoft was widely expected to write off all or part of the $7.2 billion it paid for Nokia’s handset unit in 2014, a deal that left the company with a struggling business and only 3 percent of the smartphone market.

The company announced last month that Stephen Elop, the former top boss at Nokia, would leave.

“Overall, we believe Nadella’s proactive approach at cleaning up the Nokia acquisition is a positive “tipping of the hand” around Microsoft’s future focus on software,” FBR Capital Markets analyst Daniel Ives wrote in a note.