Jul 8, 2015 2 min read

SEATTLE – Microsoft said Wednesday it would eliminate up to 7,800 jobs, more than 6 percent of its workforce, in a major overhaul of its struggling smartphone business.

The company also said it would take a $7.6 billion accounting charge related to its acquisition of Nokia’s handset operations, a clear acknowledgment that Microsoft’s foray into the mobile hardware business had borne little fruit.

While Microsoft will not stop making smartphones, the company’s chief executive, Satya Nadella, said Wednesday it would no longer focus on the growth of its own smartphone business, but instead emphasize the expansion of the broad “ecosystem” of products – including mobile phones – that ran its Windows software.

“I am committed to our first-party devices, including phones,” Nadella said in an email to Microsoft employees. “However, we need to focus our phone efforts in the near term while driving reinvention.”

The company’s retrenchment in smartphones comes as Nadella, who became chief executive last year, has been pulling Microsoft back from initiatives outside its core mission.

Rather than catering to all smartphone shoppers, Microsoft said it would narrow its focus to three types of customers: business users who want strong management, security and productivity apps; buyers at the low end of the market looking for inexpensive phones; and Windows fans.

Last year, Microsoft laid off 18,000 employees, many of whom also were working in the company’s newly acquired smartphone business. The 7,800 cuts announced Wednesday, which mainly come from smartphones, are in addition to those 18,000. The majority of the latest layoffs will be outside Microsoft’s home base in the Seattle area, including some in Finland, where Nokia originated.

At the end of March, Microsoft had more than 118,000 employees globally.

Microsoft executives have been hinting at more cutbacks for months. Nadella sent a companywide email in late June intended to rally employees for the coming year. But he also warned in the message that Microsoft would need to “make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value.”

Microsoft said it would take the $7.6 billion charge during its fourth fiscal quarter, which ended June 30, and that it would be a noncash charge reflecting the declining performance of the smartphone business, which continued to lose money and market share.

Microsoft said it also would take a cash restructuring charge of $750 million to $850 million related to the layoffs.