Was Nokia worth the human cost for Microsoft?
Microsoft is going to eliminate up to 7,800 jobs, mostly from its phone unit. Microsoft acquired Nokia in September 2013.
A man uses his mobile phone near the Microsoft logo at the Computex exhibition in Taipe on June 4, 2014.
Pichi Chuang/Reuters/File
Microsoft once described the Nokia deal as a "win-win" for employees, shareholders, and consumers, but facts say otherwise.
For the second year in a row, Microsoft is laying off thousands of its employees, mostly from the company's Nokia phone unit.
In an email to Microsoft employees on Wednesday, the company’s chief executive Satya Nadella announced that the company will lay off up to 7,800 employees over the next several months. As of March, Microsoft had more than 118,000 employees globally.
Microsoft will also take a $7.6 billion impairment charge related to its purchase of Nokia.
The announcement comes a year after Microsoft launched its largest-ever layoffs, cutting 18,000 jobs, mostly from the phone unit.
The acquisition of Nokia took place in September 2013, under Steve Ballmer’s leadership, and faced immediate criticism from Wall Street analysts and tech experts skeptical of Microsoft’s role in the world of smartphones.
In September 2013, Sam Gustin wrote in Time Magazine:
Microsoft’s $7.2 billion deal to buy Nokia’s mobile phone business and license its patents is certainly an aggressive move — one that signals a new direction for the software giant — but given Apple and Google’s dominance of the smart phone market, Microsoft’s Nokia gambit may be too little, too late.
But Microsoft was optimistic. That same month, Mr. Ballmer said, "Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen ... our entire family of devices and services."
In April 2014, the company added 25,000 Nokia employees to Microsoft's payroll – but after the two massive rounds of layoffs, it is not clear how many of those employees are still on board.
After Wednesday's announcement, a former Microsoft manager told Fortune that the Nokia purchase was a "buddy deal" between Ballmer and Stephen Elop, the former Microsoft exec who left to become CEO of Nokia and then returned to Microsoft as part of the acquisition. Mr. Elop left Microsoft two weeks ago.
But the former executive believes there still might be a way to make Nokia profitable for Microsoft: Africa and other emerging economies. "Those markets have 4 to 5 billion people that have not been touched by tech. They don’t need smart phones ... Microsoft may have a chance to play here, too. We shall see how they play their hand."