Microsoft to let go of 18,000 jobs from Nokia over the next year

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The software giant Microsoft Corporation announced in a press statement this week that it will let go of approximately 18,000 jobs over the next year. This decision is an effect of their recent acquisition of Nokia Devices and Services. Microsoft purchased the business earlier in April for $7.2 billion. It is said to be one of the largest layoffs in tech history.

Microsoft said that there is a “restructuring plan to simplify [the] organization and align the recently acquired Nokia Devices and Services business with the company’s overall strategy.” The purchase of Nokia increased Microsoft’s headcount to about 127,000 staff.

The plans for the cut were written in an email from Microsoft’s CEO Satya Nadella who was recently appointed February of this year.

Majority of the jobs that are part of the cut include about 12,500 professional and factory positions from Nokia. By June 30 of 2015, Microsoft plans to complete the layoff. This will be the largest cut of jobs for the past 39 years for the company. The last major layoff occurred in 2009 when former Microsoft CEO Steve Ballmer cut 5,800 jobs or 6 percent of their workforce. This decision was an effect of the recession.

A source said that the cuts would include the 175-strong XBox Entertainment Studios Unit. The unit’s efforts to create original content is believed to decrease but it will still continue to work on the high-profile project, the film version of the “Halo” video game.

Some say that these cuts might be a move in light of Microsoft’s competition against Google and Apple.

“We will simplify the way we work to drive greater accountability, become more agile and move faster. We plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making,” Nadella wrote in a memo to employees.

The move is considered a good one by Wall Street, considering that they were quite critical of the acquisition of Nokia. They perceived Microsoft as a bloated company under the former Microsoft CEO. According to Daniel Ives, an analyst at FBR Capital Markets, the percentage of cuts is more than what Wall Street was expecting.

“This is about double what the Street was expecting. Nadella is clearing the decks for the new fiscal year. He is cleaning up part of the mess that Ballmer left,” he said.

Nokia-related layoffs were largely anticipated immediately after Microsoft struck a deal with them. Microsoft announced then that it would cut $600 million annually in costs within the 18 months of the purchase.

Sid Parakh, an analyst at McAdams Wright Ragen said that the numbers are not as shocking as it first appeared.

“The aggregate number is still bigger than expected but it’s not as big as it comes across,” he said. “There’s going to be a lot of re-hiring in other areas of the business. On a net basis, the numbers are small.”

The Microsoft campus apparently escaped the axe, at least for now.

The shares of the software giant rose 1.8 percent to $44.88 on Nasdaq recently. This has been their their highest since the technology stock boom of 2000.

Hewlett Packard, the giant computer-maker company, also announced job losses with their plans including a cut of 50,000 employees from their 250,000 workforce over the next three to five years.

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