Microsoft retreats in smartphone battle, 1,850 jobs to go

By Jussi Rosendahl and Tuomas Forsell

HELSINKI (Reuters) - Microsoft Corp announced more big cuts to its smartphone business on Wednesday, just two years after it bought handset maker Nokia in an ill-fated attempt to take on market leaders Apple and Samsung.

The U.S. company said it would shed up to 1,850 jobs, most of them in Finland, and write down $950 million from the business. It did not say how many employees currently work on smartphones in the group as a whole.

A Finnish union representative told Reuters the cuts would essentially put an end to Microsoft's development of new phones.

"My understanding is that Windows 10 will go on as an operating system, but there will be no more phones made by Microsoft," said Kalle Kiili, a shop steward.

Microsoft said in a statement it would continue to develop the Windows 10 platform and support its Lumia smartphones, but gave no comment on whether it would develop new Windows phones.

Microsoft bought Nokia's once-dominant handset business for about $7.2 billion in 2014, but failed to turn the business around and last year announced $7.5 billion of writedowns and 7,800 job cuts.

Global market share of Windows smartphones fell below 1 percent in the first quarter of 2016, according to research firm Gartner.

Earlier this month, Microsoft sold its entry-level feature phones business for $350 million.

The company said on Wednesday it expected to cut all 1,350 jobs at its Finnish mobile phone unit and close down a research and development site in the country. A further 500 jobs will go in other countries, it said, without giving details.

"We are focusing our phone efforts where we have differentiation," said chief executive Satya Nadella in a statement.

"We will continue to innovate across devices and on our cloud services across all mobile platforms."

Nokia dominated around 40 percent of the world's mobile phone industry in 2008 before it was eclipsed by the rise of touch-screen smartphones.

As a result, Nokia and Microsoft have slashed thousands of Finnish jobs over the past decade, and the lack of substitute jobs is the main reason for the country's current economic stagnation.

"We have a very difficult situation at hand... We must quickly secure that new jobs can be found and created," Economy Minister Olli Rehn told a news conference.

Nokia, now focused on telecom network equipment, just last week said it was cutting around 1,000 jobs in Finland following its acquisition of Franco-American rival Alcatel-Lucent.

(Editing by Mark Potter and Adrian Croft)