Microsoft expects to complete most of the job cuts by the end of this year and all the restructuring by mid-2015. The plan will result in USD 1.1-1.6 billion in pretax charges over the next four quarters, including USD 750-800 million for severance and related benefits and USD 350-800 million in asset writedowns.
The plans were outlined in an email from Microsoft CEO Satya Nadella to Microsoft employees and an email from former Nokia CEO and Microsoft Executive VP Stephen Elop to Microsoft Devices Group employees. Nadella said the aim is to simplify the organisation and speed up decision-making. This will include new expectations for engineering processes, fewer layers of management and streamlined business processes and support teams.
As part of the integration of the Nokia phone business, the CEO said the company will start producing phones under its own brand to align with its strategic direction in other areas. In the high-end market, the phones will focus on "breakthrough innovation that expresses and enlivens Microsoft's digital work and digital life experiences".
In addition, the company signaled an end to the Nokia X brand for its low-end devices that support Android apps. Instead it will use the Lumia brand across more price points and focus on expanding the Windows Mobile market share in the low end of the market. Elop said support will continue for X devices, but the company will start immediately with releasing low-cost Lumia devices running Windows.
In addition, Microsoft will eliminate the Nokia distinction between 'Smart Devices' and 'Mobile Phones' as part of the restructuring. Under the new plan, the phone business unit will be led by Jo Harlow with management members of both the Smart Devices and Mobile Phones teams. This team will be responsible for the Lumia products, the transition of select future Nokia X products to Lumia and the ongoing operation of the own-brand phone business, Elop said.
Engineering will remain in Finland, with high-end products concentrated in Salo and the site in Tampere handling more affordable devices. Supporting technologies will be developed in both locations. Engineering work will end in Oulu, Finland, as well as be reduced in Beijing and San Diego. The latter two sites will focus respectively on affordable devices and specific US requirements. The sites in Espoo and Lund will continue to focus on application software development.
Phone production will be based mainly in Hanoi, with some in Beijing and Dongguan. Other Microsoft manufacturing and repair operations will shift to Manaus and Reynosa respectively, while the company gradually shuts down its site in Komaron, Hungary.
Microsoft also signaled a review of its sales strategy for phones, in order to focus more on countries where it already has a strong presence and develop more locally targeted strategies. Elop said the phone business will focus on acquiring new customers in the markets where Microsoft’s services and products are most concentrated. He added that the restructuring will have little impact on Microsoft's other devices, the Xbox and the Surface tablets.
