Microsoft Tallies True Costs of M&A Boom: Layoffs, Write-Offs, Shut-Downs, Economic Decline

Microsoft Tallies True Costs of M&A Boom: Layoffs, Write-Offs, Shut-Downs, Economic Decline
by Wolf Richter • July 9, 2015


As the M&A boom in the US explodes from record to record, with one mega-merger succeeding another, Microsoft clarified on Wednesday just how much all this fun costs down the road, in jobs and dollars: relating mostly to its acquisition of Nokia, it announced a second wave of layoffs, write-offs, and shut-downs.

Share repurchases, M&A, layoffs, and cost-cutting are easier to make happen for a CEO than inventing things and boosting sales organically, which is really hard.

Companies call the dizzying costs of acquisitions, paid for with cash and/or stock, “non-cash charges” to make them appear irrelevant. Analysts feed out of their hands and eat it up. To justify acquisitions, CEOs and analysts sprinkle their pronouncements with terms like “efficiencies” and “synergies” that are euphemisms for cost-cutting, destruction of productive capacity, and layoffs.

In September 2013, Microsoft acquired Nokia’s mobile-phone business and patents. Nokia was junk-rated. Its market share was collapsing. It had lost over $4 billion in the prior year. But its marginalized smartphones were using the Windows Phones operating system that no one else of consequence was using. And that was a big deal.

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In February 2014, Satya Nadella was anointed CEO. On July 17, the meaning of annual cost savings became clear: the company would axe 18,000 people and take a $1.6 billion “non-cash” charge. And in premarket trading after the announcement of the job cuts, shares rose to a 14-year high. Nadella was putting his stamp on the company. ................(more)

http://wolfstreet.com/2015/07/09/microsoft-tallies-the-true-costs-of-the-ma-boom-layoffs-write-offs-shut-downs-and-economic-decline/