Satya Nadella, Microsoft Corp.’s (MSFT) chief executive since February, announced he was cutting about 14% of Microsoft’s workforce and that the company would take charges to earnings totaling up to $1.6 billion over the next year. The move is part of an ambitious plan to streamline the company’s operations in the wake of its recent acquisition of Nokia’s (NOK) devices and services business.

The bulk of the cuts—about 12,500 of the 18,000 expected—will come from areas of overlap with Nokia Corp.’s mobile-phone business, which Microsoft acquired April, absorbing an additional 25,000 workers.

The layoffs will be the largest in Microsoft’s history, surpassing the more than 5,000 positions eliminated in 2009.

Microsoft also disclosed it would stop making mobile phones powered by Google Inc.’s (GOOGL) Android operating system. Nokia earlier this year introduced low-cost Android phones, known as the Nokia X line, which meant Microsoft would be selling phones supporting the software of its rival Google. The Nokia X line will give way to lower-priced phones running Microsoft’s own Windows Phone software, though the company said it would continue to sell and support existing Nokia X devices.

In addition, the company is closing its two-year-old Xbox Entertainment Studios to focus more exclusively on gaming. The 200-person studio, located in Santa Monica, California, will close in the coming months. The studio will remain open to finish projects currently in production under its Xbox Originals brand. That includes “Halo: Nightfall,” the digital feature planned for later this year, as well the Halo television series produced by Steven Spielberg. The documentary series “Signal to Noise”–the first episode of which features the Atari E.T. video game dig in New Mexico that Microsoft helped pay for–will also be completed.

 

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Wayne Thorp
ABOUT THE AUTHOR:

Wayne A. Thorp, CFA, is editor of Computerized Investing and a vice president and the senior financial analyst at The American Association of Individual Investors (AAII). He is also the program manager for AAII's Stock Investor Pro fundamental stock screening and research database program and is on the advisory boards of AAII's Stock Superstars Report and Dividend Investing newsletters. He holds the Chartered Financial Analyst (CFA) designation and is a 1997 honors graduate of DePaul University in Chicago. Wayne's interests include stock screening, technical analysis and charting, social media and tech gadgets. However, in the summer he'd prefer to be hip-deep in northern Michigan's Manistee River fly-fishing for rainbow trout.

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