Microsoft Corporation (MSFT) Closes Mobile Phone Unit in Finland, Restructers Phone Business

Microsoft Corporation (MSFT)

Microsoft Corporation has decided to close its Finland mobile phone business, which the U.S. software giant bought just two years ago. On Monday, the company confirmed that it is closing the phone business, resulting in a loss of up to 1,350 jobs in the Nordic country. Microsoft spent $7.2 billion to buy the troubled phone business from Finland-based Nokia in 2014, according to a report from Reuters.

Microsoft Corporation (MSFT)

Microsoft Restructuring Smartphone Business

In May, the company announced that it plans to streamline the company’s smartphone hardware business. The restructuring will impact up to 1,850 jobs.

“We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” said CEO Satya Nadella said in a statement. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”

The company will record an impairment and restructuring charge of about $950 million, including about $200 million in severance payments.

Microsoft Corporation anticipates this will result in the reduction of up to 1,350 jobs at Mobile Oy in Finland, as well as up to 500 additional jobs globally.

The restructuring is expected to be fully completed by July 2017, the end of the company’s next fiscal year.

Also, in May, Microsoft announced that it agreed to sell its entry-level feature phone assets to FIH Mobile and Finland-based HMD Global Oy for $350 million.

The deal, which is expected to close in the second half of 2016, includes the transfer of Microsoft’s feature phone assets, including brands, software and services, care network and other assets, customer contracts, and critical supply agreements, to the two companies.

Under the deal, around 4,500 employees in Vietnam will transfer to or have an opportunity to join FIH Mobile or HMD Global, subject to compliance with local law. FIH Mobile, a subsidiary of Hon Hai/Foxconn Technology Group, will also acquire Microsoft Mobile Vietnam, the company’s manufacturing facility in Hanoi, Vietnam.

Microsoft Was Too Late To Smartphone Party

The company was unable to impress the mobile phone lovers with Windows phones. Eddie Murphy, analyst at Priory Consulting, believes that the company was too late to the phone market, BBC News reported.

According to the research firm Gartner, Windows phones captured less than 1% of the global smartphone market in the first quarter. On the other hand, Android and Apple had 84% and 15% of the market, respectively, Bloomberg reported.

Murphy said: “They [Microsoft] spent all that money because they recognized that the smartphone market was important. They were right – but just too late. Apple and Android devices have dominated the space and Windows hasn’t made an impact.”

Microsoft failed to increase the number of apps available on the Windows Store. “App Gap,” a shortage of popular titles appearing on its smartphones, was the biggest problem for the company. The Windows Store has a fraction of the apps found in the Apple App Store and Google Play.

Murphy said: “It was a tremendous problem. I have a lot of sympathy because I have a Windows phone and the number of apps is very small in comparison to Android. That was a real disadvantage for Microsoft.”

Shares of Microsoft Corporation are trading down 0.12% in the morning session.

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