OPERATIONS

Microsoft to cut 18,000 jobs; focus on smartphone work capabilities

BY Dan Berthiaume

Redmond, Wash. – Microsoft Corp. is enacting a restructuring plan to simplify its organization and align the recently acquired Nokia mobile devices and services business with the company’s overall strategy. These steps will result in the elimination of up to 18,000 positions in the next year.

Of the total, about 12,500 professional and factory positions will be eliminated through synergies and strategic alignment of the Nokia devices and services business acquired by Microsoft on April 25. The actions associated with the plan are expected to be substantially complete by Dec. 31, 2014, and fully completed by June 30, 2015.

In an email to employees explaining the move, Microsoft CEO Satya Nadella said the job cuts are part of an effort to “drive greater accountability, become more agile and move faster.” This will include fewer layers of management, a flattened organization and greater control span for managers who remain.

In addition, Nadella said Microsoft will “focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences” in its smartphone segment. Given the recent announcement that Apple will soon offer IBM analytical technology on its iPhones to make them more substantial work devices, it should be interesting to watch what Microsoft does in the burgeoning market for smartphones as professional tools.

The company expects to incur pre-tax charges of $1.1 billion to $1.6 billion during the next four quarters, including $750 million to $800 million for severance and related benefit costs, and $350 million to $800 million of asset-related charges.

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FINANCE

American Apparel update: The drama continues

BY Marianne Wilson

New York — American Apparel shareholders Bigger Capital Fund, Bachelier LLC and the Bigger Family, have sent a letter to the company’s board seeking the resignation of co-chairmen David Danziger and Allan Mayer as board members.

The letter criticized the board’s "stealthily and abruptly ousting American Apparel’s long-standing CEO and largest shareholder knowing that their actions will cause a near-imminent default under important contractual obligations of the company and cause it to default on nearly $10 million in loans."

The letter accused the two board members of making “seemingly arbitrary decisions taking reckless risks with our capital and jeopardizing our business with little regard for shareholder interests or the future of our company.”

Danziger and Mayer are expected to continue with their terms in the reconstituted American Apparel board. The new board is part of an agreement with Standard General whereby the investment firm would give the retailer up to $25 million in funding. Under the terms of the deal, founder and former CEO Dov Charney would have the temporary title of strategic consultant.

According to Reuters, Standard General, which owns an approximate 44% stake in the company, is leaving the decision of whether to allow Charney to return to the company up to the American Apparel board, following a third-party investigation by FTI Consulting.

Charney was dismissed as CEO on June 18 due to allegations of misconduct, which he has denied. Charney voluntarily stepped down from the company’s board as part of an agreement with Standard General where the firm will provide up to $25 million that will enable American Apparel to pay off a nearly $10 million loan from its longtime lender Lion Capital. Charney will remain as a strategic consultant with the company until an investigation into his alleged misconduct is concluded.

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FINANCE

Sherwin-Williams net income jumps 13% in Q2; 80-90 new stores planned

BY Dan Berthiaume

Cleveland – Higher pretax income and gross profit helped push net income at The Sherwin-Williams Company up 13% in the second quarter of fiscal 2014 to $291 million, from $257 million in the year-ago period.

Net sales rose 12% to $3.04 billion from $2.7 billion, primarily due to higher paint sales volume in the paint stores group and acquisitions.

Sherwin-Williams plans to open 80 to 90 new stores in its paint stores group during fiscal 2014. Consolidated earnings per share and net sales are expected to rise both for the third quarter and full fiscal year 2014.

“We are pleased with the continued strong positive sales and earnings per share momentum,” said Christopher M. O’Connor, chairman and CEO. “Our Paint Stores Group continues to lead with sales volume and operating results. The Paint Stores Group architectural volume growth was strong across all end market segments.”

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