The $ 9.5 billion deal between Microsoft and Nokia proved to have brought a huge loss to the software company. The Finnish mobile company struck the deal with Microsoft in 2014. The tech giant has overpaid for the intellectual properties of Nokia.
The write-downs of the merger amounts to $14 billion. Microsoft got $1.5 billion from the phone company, while it paid Nokia $2 billion for licensing its maps and patents. The deal was made by Steve Ballmer, Microsoft's former head, before he stepped down in 2014.
The losses showed it was a huge blunder on Ballmer's part, who initially called the agreement as "a bold step intor the future". Ballmer projected that the deal will be Microsoft's foray into competing with huge smartphone businesses such as Apple, Samsung, and Google.
While new chief exacutive Satya Nadella announced that Microsoft is not leaving the phone market and is staying loyal to its own Windows Phone operating system, the value of the deal with Nokia has been written off almost entirely.
Following this multibillion misstep is Nadella's announcement of a 7,800 job cut in the software company. The majority of the jobs that will be cut comes from the mobile division.
"I am committed to our first-party devices, including phones," Mr. Nadella wrote in an email to his employees. "However, we need to focus our phone efforts in the near term while driving reinvention."
Analysts say that the acquisition of Nokia may just buy more time for Microsoft to find a more marketable platform for its Windows Phone. The company will be releasing Windows 10 on mobile as part of the roll out for the new operating system.
Last year, Microsoft cut down 18,000 positions from its 118,000-member work force around the world.
Since being appointed chief executive of Microsoft, Nadella has been going against steps Ballmer took, among them the acquisition of Nokia. Analyst Daniel Ives says the actions taken by Nadella are for "really cleaning up Ballmer's mess."
Mr. Ballmer has not commented on the issue yet.
