After days of speculation,
) finally announced on Thursday that it will eliminate up to 18,000
jobs over the next one year, as it takes steps to build leaner
business processes and integrate Nokia Oyj´s handset unit.
Shares of Microsoft scaled a new 52-week high as investors cheered
the company's announcement to slash jobs in a strategic move. The
restructuring will significantly trim its workforce as the company
attempts to streamline the cost structure and thus boost the bottom
At present, Microsoft has nearly 127,000 employees worldwide, which
is far more than its competitors
). Microsoft will now lay off 14% of its current workforce,
making this the biggest round of job cuts in its history. The last
time Microsoft announced layoffs was in 2009, when 5% of its
workforce was eliminated in order to deal with the recession.
This time round, Microsoft will slash about 12,500 jobs from its
Nokia business, which is nearly half of the workforce inherited
through the Nokia acquisition in April. Microsoft paid $7.2 billion
) handset business, which was renamed Microsoft Mobile Oyj.
When it struck the deal last year in September, Microsoft had
pledged to generate annual cost savings of $600 million within 18
months after the closure of the deal. Therefore, it seems that the
job cuts in areas where the two companies overlap are a part of the
plan to live up to its commitment.
Approximately 1000 jobs cuts are expected to take place in Finland
where Microsoft plans to close down a Nokia research facility in
the Oulu region that currently employs 500 people. The remaining
500 eliminations will come from other Nokia units across Finland.
Trimming its workforce will help Microsoft combat losses due to the
persistent decline in worldwide PC sales as a result of the rising
demand for smartphones and tablets among consumers and corporates.
Furthermore, it will help to lower operating expenses and
concentrate more on emerging areas like mobile, wearables,
cloud-computing and productivity software, as the software
developer goes from a "devices and services" company to a
"cloud-first mobile-first" one.
Including the eliminations, Microsoft also announced that it will
shutter two-year-old Xbox Entertainment Studios over the next few
months and focus more on gaming.
carry a Zacks Rank #3 (Hold).
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