Microsoft to cut 18,000 jobs in cost-saving move

Microsoft announced the biggest round of layoffs in its 39-year history Thursday, outlining plans to cut 18,000 jobs in a move that marked the CEO's sharpest pivot yet away from his predecessor's drive for the company to make its own devices.

Although some cuts had been expected since it acquired Nokia's mobile-device unit, the number amounted to 14 percent of the Microsoft workforce - about twice what analysts had estimated.

The cuts will include about 12,500 jobs associated with the Nokia unit - nearly half the 28,000 employees Microsoft brought on board in April through the acquisition.

When the cuts are complete, the company will still have about 10,000 more employees than before the Nokia acquisition, with an overall headcount of 109,000.

In a public e-mail to employees, chief executive Satya Nadella said the changes were needed for the company to "become more agile and move faster." The move also pushes Nokia to focus solely on the Windows Phone operating system.

Nadella is clearly backing away from former CEO Steve Ballmer's vision of a Microsoft that makes its own smartphones and tablets.

"He's making a pretty serious game-changing strategy move away from hardware," said Michael Turits, managing director of equity research for Raymond James & Associates.

Nadella indicated Microsoft will largely abandon low-price Nokia Asha phones, which work on their own non-Windows operating system, and reverse a strategically questionable move by Nokia in February to launch "X" phones supporting Google's Android platform.

"To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft's digital work and digital life experiences," he said.

About 1,350 workers around Microsoft's Redmond, Wash., headquarters were laid off Thursday, as were 1,800 workers in Hungary and nearly 370 in San Diego. The Nokia cuts include 1,100 jobs in Finland. The company also is closing Xbox Entertainment Studios in Santa Monica, Calif., which produced original video content.

Microsoft Corp. expects charges of $1.1 billion to $1.6 billion over the next four quarters, largely for severance payments. The move puts it on track to meet the target set in September of saving $600 million in annual costs within 18 months after the Nokia deal closed. Shares of Microsoft closed up 45 cents, or 1 percent, to $44.53 Thursday.