On Wednesday, Microsoft (MSFT) announced that it will sell its Nokia Lumia phone business to Foxconn for $350 million. More specifically, the company is handing over the rights of the Nokia brand to a subsidiary of Foxconn, known as FIH mobile. This news comes as Microsoft continues to struggle with its own Windows 10 platform. Not taking the Windows 10 platform into account, Lumia phones have not been selling well. Nokia now has a new game plan in mind. It will sell rights of its brand to a new phone company called HMD global, which will create Android phones and tablets.
Deal First Reached
Microsoft had a lot of cash on hand back in 2014, and it decided that it would put it to use by purchasing Nokia’s phone business unit and patents. The deal was first announced in September of 2013, but it wasn’t finalized until April of 2014. The company ended up paying $7.6 billion to acquire the business. The idea to acquire Nokia’s business came from the previous CEO, Steve Balmer who thought it would be a good acquisition. Ironically enough, another high level management official at the company, Satya Nadella was against the deal. Now, Satya Nadellla has taken over the role of the CEO of Microsoft.All he can do is erase the mistakes of the past and move on.After years of failure, it was decided that Microsoft would finally abandon the phone program completely.
Abandoning The Lumia
It was finally time for Microsoft to get rid of its awful mistake. Therefore, on July 2015 the company took an impairment charge of $7.6 billion. It was a smart move for the CEO to let go of the business, as Lumia phones and Windows 10 phones weren’t catching on with audiences at all. According to a technology research firm, known as Gartner, only 1.1% of the world’s smartphones run Windows 10. Unfortunately, the winding down of the business didn’t just end with an impairment charge. With it, it also brought a loss of many jobs. With the Nokia Device Services — NDS — being shut down, Microsoft laid off 7,800 employees. If that was the end of the entire problem, it would have been great. The problem was that it didn’t end on that note. On top of everything the company had suffered through, it also would incur additional charges for restructuring totaling $800 million. The only good news to come out of this is that the company will continue to support Windows 10 mobile and lumia devices for customers. Taking a look at the most recent data, it is no surprise as to why Microsoft got rid of the Lumia device unit. In the most recent quarter, it only sold 2.3 million devices. Taking a look at last years number in the same quarter of 8.6 million devices, that is a 73% drop.
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