Summary
Microsoft Corporation (MSFT) announced on May 25, 2016, a significant restructuring of its smartphone hardware business. This initiative involves the reduction of up to 1,850 positions, with a substantial portion of these layoffs (1,350) occurring at Microsoft Mobile Oy in Finland. This strategic move reflects a pivot away from the costly smartphone hardware segment that has been a drag on the company's financial performance. As a direct consequence of these streamlining efforts, Microsoft anticipates recording an impairment and restructuring charge of approximately $950 million in the fiscal quarter ending June 30, 2016. This charge includes roughly $200 million allocated for severance payments. The company expects these restructuring actions to be substantially completed by the end of the 2016 calendar year, with full completion anticipated by the end of its next fiscal year in July 2017. Investors should monitor the impact of these charges on near-term earnings and the company's future strategic direction.
Key Highlights
- 1Microsoft announced plans to streamline its smartphone hardware business.
- 2The restructuring will result in the reduction of up to 1,850 positions.
- 3Approximately 1,350 of these reductions will occur in Finland at Microsoft Mobile Oy.
- 4Microsoft will record an impairment and restructuring charge of approximately $950 million for the quarter ending June 30, 2016.
- 5The restructuring charge includes approximately $200 million for severance payments.
- 6Actions are expected to be substantially complete by the end of calendar year 2016 and fully completed by July 2017.