One week after Microsoft ( MSFT ) sold its low-end feature phone business, the company on Wednesday announced plans to streamline its remaining smartphone business and take a $950 million impairment and restructuring charge. Microsoft expects to cut up to 1,850 jobs as part of the realignment. It will record the financial charge in its fiscal fourth quarter, which ends June 30. “We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” Microsoft CEO Satya Nadella said in a statement . “We will continue to innovate across devices and on our cloud services across all mobile platforms.” Microsoft acquired the feature phone and smartphone businesses from Nokia ( NOK ) for $7.5 billion in April 2014. Microsoft wrote off the entire value of the deal in July 2015 when it recorded an impairment charge of $7.6 billion related to the Nokia assets. At the time, it also laid off 7,800 workers from those operations. On May 18, Microsoft announced it is selling its entry-level feature phone business for $350 million to FIH Mobile, a subsidiary of Taiwan-based contract manufacturer Foxconn, and HMD Global, a newly created company in Finland that has licensed Nokia’s brand and intellectual property. Microsoft has had a tough time competing in the mobile phone market against Apple ‘s ( AAPL ) iPhone and handsets using the Android operating system from Alphabet ‘s ( GOOGL ) Google. Microsoft’s Windows phones accounted for less than 1% of smartphone sales to end users worldwide in the first quarter, research firm Gartner said. Microsoft shares rose 1% to 52.12 on the stock market today . RELATED: Microsoft Stock Oversold, Gets Upgrade On Cloud Prospects
Two years after Microsoft ( MSFT ) purchased Nokia ‘s ( NOK ) mobile phone unit, the software giant is moving to exit Nokia’s entry-level feature phone business. Microsoft announced Wednesday that it is selling the business for $350 million to FIH Mobile, a Hong Kong-listed subsidiary of Taiwan-based contract manufacturer Foxconn, and HMD Global, a newly created company in Finland that has licensed Nokia’s brand and intellectual property . Microsoft said it will continue to develop Windows smartphones, such as its Lumia devices, and will continue to support third-party handsets from partners like Acer, Alcatel, HP Inc. ( HPQ ), Trinity and Vaio. Feature phones are low-end devices that have limited capabilities compared with full-fledged smartphones. Feature phones are targeted mostly at customers in emerging markets. Microsoft bought the Nokia handset business in April 2014 for $7.5 billion, a deal negotiated by Microsoft’s previous CEO, Steve Ballmer, in September 2013. Microsoft wrote off the entire value of the deal in July 2015 when it recorded an impairment charge of $7.6 billion related to the Nokia assets. “Microsoft’s exit from the feature phone business is not at all surprising,” IHS analysts Ian Fogg and Daniel Gleeson said in a research report Wednesday. “The deal again highlights Microsoft’s continued failure in mobile.” Microsoft’s smartphone future is “up in the air” because the company hasn’t released any new flagship handsets for Windows 10 Mobile in a while, they said. Microsoft shipped just 2.3 million smartphones in the first quarter, down 70% from Q1 2015, IHS said. “Realistically Microsoft can hope to be no more than a bit player in the mobile phone market now,” Fogg and Gleeson said. The smartphone market is dominated by Apple ‘s ( AAPL ) iPhone and Android-based devices from Samsung and others. Microsoft stock was up a fraction in morning trading in the stock market today , near 51, but trading below its 50-day line since its earnings release late last month disappointed.
Apple ‘s ( AAPL ) lukewarm iPhone 7 ramp may slug Analog Devices ( ADI ) early Wednesday, when the chipmaker is expected to report a 5% year-over-year revenue dip on a 40% sequential plunge in sales to Apple. But a “bright spot” of industrial and automotive sales will show a seasonal boost, outplaying rival Xilinx ( XLNX ), and wireless communication revenue will come off a trough to top competitors Nokia ( NOK ) and Cavium ( CAVM ), MKM analyst Ian Ing said Tuesday. In morning trading on the stock market today , Analog Devices stock was up a fraction, near 55.50. Shares are flat for the year vs. a 6% fall in IBD’s 38-company Electronic Semiconductor-Manufacturing industry group. Analog Devices stock hit a 2016 high on April 27 at 59.87, but it’s down 7% in the three weeks since then. In late April, Apple reported its first-ever year-over-year decline in iPhone shipments, in its March-quarter results. Analog Devices is expected to post $777.6 million in sales and 62 cents earnings per share ex items, down a respective 5% and 15% vs. the year-earlier quarter, for its fiscal Q2 ended on or near April 30, according to the consensus of 29 analysts polled by Thomson Reuters. That would follow flat Q1 sales and Analog Devices’ first EPS decline in 11 quarters. Wall Street expects typically strong Q3 and Q4 sales to also decline — by 2% and 6%, respectively. Over the past two years, Q3 had risen an average 13.5%, and Q4 sales had gained an average 20%. Recent reports indicate Apple suppliers are getting fewer orders compared with the year-ago period. Credit Suisse analyst John Pitzer expects Analog Devices to report $30 million in Q2 sales to Apple, down 40% sequentially. For Q3, he models $80 million in sales to Apple vs. consensus views for $110 million. “We suspect modest downside to our Apple revenue estimate for (the second half of the year) offset by upside to (industrial, automotive and communications),” he wrote in a research report. Apple accounts for about 10% of Analog Devices’ sales, Pitzer estimated. Views for $200 million in Apple sales for the latter half of 2016 would be down 15% year over year, but they still “might be $20 million to $30 million too high,” he said. But $1.33 billion views for automotive, industrial and communications sales, up 2% vs. the year-earlier period, doesn’t reflect accelerating advanced driver assistance systems (ADAS) and communications infrastructure opportunities, he wrote. Pitzer retained his outperform rating and 72 price target on Analog Devices stock. Ing kept his neutral rating and 56 price target. Analog Devices’ messaging has tilted in favor of “analog utility” investors vs. momentum growth investors, Ing wrote in a report. Analog utility investors prefer business-to-business ventures over “volatile” portables exposure.