“Good thing for Steve Ballmer that Microsoft isn’t a California corporation, which UNBELIEVABLY does not apply the common law Business Judgment Rule to corporate officers!!! If it had been, he could be personally sued for billions, alleging simple negligence for his horrible business decisions (only obvious with the benefit of hindsight) re. smartphones that has cost Microsoft shareholders’ billions in actual losses and tens of billions more in lost shareholder value.”, Mike Perry, former Chairman and CEO, IndyMac Bancorp
“There’s no chance that the iPhone is going to get any significant market share,” Mr. Ballmer predicted in 2007….“We’ve evolved our thinking,” Mr. Ballmer said when unveiling the Nokia deal in September 2013. He said Microsoft would “blaze the trails here with our own first-party hardware.”….The (July 8, 2015) admission was a harsh one for its investors and employees: It is writing down about 80% of the $9.4 billion deal for Nokia’s handset business, and will cut 7,800 workers from its global payroll—mostly in its mobile-phone operation—a year after a restructuring that cut 18,000 jobs. The twin blows are an embarrassing reminder of Microsoft’s inability to find a foothold in the smartphone industry….”, Shira Ovide, “Microsoft to Cut 7,800 Jobs on Nokia Woes”, The Wall Street Journal, July 9, 2015
“Nevertheless, the FDIC insisted on pursuing an equally baseless simple negligence claim, alleging that Mr. Perry should have had a crystal ball, seen the financial crisis coming and stopped making loans sooner than IndyMac did.” Because California does not apply the common law Business Judgment Rule to corporate officers, it is one of the only, if not the only, state in which the FDIC could bring a lawsuit based on simple negligence.” D. Jean Veta, a Covington partner who leads Mr. Perry’s defense. (Excerpt from Covington & Burling, LLP’s December 14, 2012 press release re. Michael W. Perry’s civil settlement with the FDIC.)
Microsoft to Cut 7,800 Jobs on Nokia Woes
Smartphone struggles trigger $7.6 billion write-down on $9.4 billion deal
Microsoft says it will cut up to 7,800 jobs and write down by about $7.6 billion the value of its struggling mobile-phone business. Marcelo Prince joins Lunch Break with Tanya Rivero. Photo: Reuters
By Shira Ovide
Microsoft Corp. tried for years to crack the mobile market by retooling its software, replacing several executives and spending billions of dollars to acquire a hardware business. On Wednesday, the Redmond, Wash., giant acknowledged it will try yet another approach.
The admission was a harsh one for its investors and employees: It is writing down about 80% of the $9.4 billion deal for Nokia’s handset business, and will cut 7,800 workers from its global payroll—mostly in its mobile-phone operation—a year after a restructuring that cut 18,000 jobs.
The twin blows are an embarrassing reminder of Microsoft’s inability to find a foothold in the smartphone industry after more than a decade of strategy zigzags and billions of dollars of investment. The trends that put a personal computer in nearly every pocket or purse, more than any other technological shift in the past decade, have eroded Microsoft’s former position at the center of computing.
Chief Executive Satya Nadella, who disclosed the moves in an email to employees, said Microsoft will remain in the mobile business, but offer fewer models and follow a less ambitious road map. Its road ahead will focus on business customers, Windows software devotees and those looking for cheap smartphones.
A Microsoft spokesman declined to comment or make Mr. Nadella available.
Shares of the company ended Wednesday little changed at $44.24, bucking a broader market selloff. The stock is up 21% since its close on the day before Mr. Nadella was named CEO in February 2014.
Microsoft was among the early entrants in the smartphone business with its Windows Mobile phone software released in the early 2000s. But its fortunes sagged as the industry shifted toward consumer-friendly phones from companies like BlackBerry Ltd. and especially Apple Inc. Mr. Nadella’s immediate predecessor Steve Ballmer famously dismissed the iPhone in its early days for its high cost and lack of a keyboard. “There’s no chance that the iPhone is going to get any significant market share,” Mr. Ballmer predicted in 2007. Since then, the company several times overhauled its mobile executive team and repeatedly revamped its smartphone software.
Each time, Microsoft said the changes would improve sales of Windows phones. They didn’t. At the same time, the market for personal computers started to shrink, eroding Microsoft’s central position in computing.
Mr. Ballmer decided Microsoft couldn’t just develop and license the software that powered smartphones, as it had done with personal computers. So he bid for Nokia in 2013 as a way to give Microsoft control of smartphone hardware as well, mirroring Apple’s iPhone strategy.
“We’ve evolved our thinking,” Mr. Ballmer said when unveiling the Nokia deal in September 2013. He said Microsoft would “blaze the trails here with our own first-party hardware.”
He was unavailable to comment on Wednesday.
Mr. Nadella hasn’t made that promise pay off. Fewer than three of every 100 new smartphones sold world-wide bear Microsoft’s brand, according to research firm IDC, a bit less than the company’s market share at the same point in 2013. Meanwhile, Apple and phone makers like Samsung Electronics Co. that use Google Inc.’s Android software have solidified their grip on the smartphone market.
“It was a series of missteps,” said Jan Dawson, chief analyst at researcher Jackdaw Research. Mr. Dawson said he believed Microsoft would give up on its smartphone business unless it managed to find its footing with a new version of Windows due to launch later this month.
Meanwhile, Microsoft’s losses on its homegrown phones have increased. In the three months ended March 31, it lost an average 12 cents on each phone it built, before those devices even left the factory floor. Microsoft fans have complained the company hasn’t released for many months a new model of high-end smartphone that competes with the iPhone. Mr. Nadella has promised one before the holidays.
For now, the struggles in Microsoft’s smartphone business have forced Mr. Nadella to address questions of whether the company would be better off dumping its mobile-phone operation altogether.
“It is important for us to be in the handset market,” Mr. Nadella said at an April event in response to an analyst’s question about whether Microsoft should continue to make smartphones. His email to employees on Wednesday restated the commitment to the company’s homegrown mobile business.
Mr. Nadella also acknowledged that Microsoft would revamp its smartphone strategy, though he was light on the details. “We’ll run a more effective and focused phone portfolio business while retaining capability for long-term reinvention in mobility,” he said in a statement.
Microsoft likely will reduce the number of phones it makes, retreat from selling phones in some countries and reduce the number of carriers it supplies, said a person familiar with the company’s plans. Microsoft acquired facilities from Nokia to manufacture some Windows mobile phones. The company didn’t announce changes in that area.
Mr. Nadella said Microsoft would seek to encourage more independent phone makers to run Windows, just as Microsoft does with PC companies. Phone makers such as HTC Corp. and China’s ZTE Corp. make handsets tailored to run the mobile version of Microsoft’s Windows software, but for now Microsoft’s own brand is responsible for an overwhelming majority of smartphones that come with the Windows operating system. It isn’t clear independent companies would be interested in pushing Windows smartphones that have so little sales potential.
The write-down of roughly $7.6 billion wipes out the majority of the $9.4 billion in value Microsoft had recorded for the business. The company also said it would take a restructuring charge of between $750 million and $850 million as it eliminates up to 7,800 jobs out of a current workforce of 118,000.
Last July, Mr. Nadella said the company would cut up to 18,000 positions in the largest workforce reductions in Microsoft’s history. Most of those cuts were to reflect overlapping positions from the Nokia deal.