Microsoft Corporation (NASDAQ:MSFT) announced plans to restructure the company’s phone hardware business to better focus and align resources. Microsoft also announced the reduction of up to 7,800 positions, primarily in the phone business. As a result, the company will record an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services (NDS) business in addition to a restructuring charge of approximately $750 million to $850 million.
Today’s announcement follows recent moves by Microsoft to better align with company priorities, including recent changes to Microsoft’s engineering teams and leadership, plans to transfer the company’s imagery acquisition operations to Uber, andshifts in Microsoft’s display advertising business that enable the company to further invest in search as its core advertising technology and service.
Today’s plans were outlined in an email from Microsoft CEO Satya Nadella to Microsoft employees.
“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family,” Nadella said. “In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
Microsoft will record a charge in the fourth quarter of fiscal 2015 for the impairment of assets and goodwill in its Phone Hardware segment, related to the NDS business. This charge has no impact on cash flow from operations and is nondeductible for income tax purposes. Based on the new plans, the future prospects for the Phone Hardware segment are below original expectations. Accordingly, the company concluded that an impairment adjustment of its Phone Hardware segment assets and goodwill of approximately $7.6 billion is required.
The actions associated with today’s announcement are expected to be substantially complete by the end of the calendar year and fully completed by the end of the company’s fiscal year. (Original Source)
Shares of Microsoft closed yesterday at $44.30. MSFT has a 1-year high of $50.05 and a 1-year low of $40.12. The stock’s 50-day moving average is $46.08 and its 200-day moving average is $44.45.
On the ratings front, Microsoft has been the subject of a number of recent research reports. In a report released today, Morgan Stanley analyst Keith Weiss maintained a Hold rating on MSFT, with a price target of $51, which represents a potential upside of 15.1% from where the stock is currently trading. Separately, on July 1, KeyBanc’s Brendan Barnicle maintained a Buy rating on the stock and has a price target of $55.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Keith Weiss and Brendan Barnicle have a total average return of 22.9% and 10.3% respectively. Weiss has a success rate of 71.4% and is ranked #150 out of 3692 analysts, while Barnicle has a success rate of 60.9% and is ranked #561.
Overall, 4 research analysts have rated the stock with a Sell rating, 7 research analysts have assigned a Hold rating and 13 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $47.57 which is 7.4% above where the stock closed yesterday.