Microsoft To Cut Up To 18,000 Positions, To Incur Charges

(RTTNews) - Software giant Microsoft Corp. (MSFT) Thursday said it would eliminate up to 18,000 positions over the next year, as part of a restructuring plan to simplify its operations and align the recently acquired Nokia Devices and Services business with the company's overall strategy.

Of the total, about 12,500 professional and factory positions will be eliminated through synergies and strategic alignment of the Nokia Devices and Services business. Microsoft acquired Nokia Oyj's (NOK) handset business on April 25.

The actions associated with the plan are expected to be substantially completed by December 31, 2014, and fully completed by June 30, 2015.

Microsoft expects to incur pre-tax charges of $1.1 billion to $1.6 billion over the next four quarters.

This includes $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.

In an e-mail to employees Microsoft's CEO Satya Nadella said, ''The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.''

Nadella said the company is moving now to start reducing the first 13,000 positions. The vast majority of employees who will lose jobs will be notified over the next six months.

Microsoft said just as it is eliminating roles in some areas, it is also adding roles in certain other strategic areas.

Nadella noted that the workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

The company plans to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making.

The business processes and support models will be more lean and efficient with greater trust among teams, Nadella said.

Noting that the firm is working to integrate the Nokia Devices and Services teams into Microsoft, Nadella said the first-party phone portfolio would align to Microsoft's strategic direction.

In a separate e-mail to Microsoft Devices Group employees, Microsoft Executive Vice President Stephen Elop said it is particularly important to recognize that the role of phones within Microsoft is different than it was within Nokia.

''Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft's digital work and digital life experiences, while accruing value to Microsoft's overall strategy,'' he noted.

Elop said the company plans to consolidate the former Smart Devices and Mobile Phones business units into one phone business unit that is responsible for all of phone efforts.

Under the plan, the phone business unit will be led by Jo Harlow with key members from both the Smart Devices and Mobile Phones teams in the management team. This team will be responsible for the success of the Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the first phone business.

MSFT, which closed at $44.08 on Wednesday, is up 2.8 percent in pre-market activity.