Today Microsoft CEO Satya Nadella announced that the company will write off the $7.6 Billion Nokia deal. This comes after the memo that he sent throughout the company that he will have tough choices to make in the coming weeks. Unsurprisingly, the hardware business was the second division to get big job cuts after Microsoft shifted their Bing Maps and Bing Display Ads businesses to third parties.

Lumia was purchased by Microsoft from Nokia for a landmark deal under Steve Ballmer and Satya was famously against the move at the time. This brings into question whether Microsoft will remain in the phone business. Satya did iterate that he will still focus on bringing world class experiences with specialized hardware to the fore, as they have done with Surface.

So the low cost Lumia segment got their marching orders along with the remaining 7800 employees. We expect the new Windows 10 flagships that have been leaked earlier this month will fall under the Windows division led by Terry Myerson who is in charge of Surface, Hololens and Windows.

This is just the beginning for the new Microsoft under Satya Nadella. Fortunately, he bolstered the gaming division calling it ‘key to Microsoft’s success’. Hopefully they’ll focus on making hardware that focusses on the strengths of Windows 10 and leave the low end market to their partners. This goes a long way in repairing broken ties with long held OEM friendships.

Update: Microsoft flagships will still be released this year. They will focus on three segments in the Phone market namely Business, Value and Flagship. Confirmed by sources by Mary Jo Foley.

Microsoft is expected to make a loss this quarter thanks to this one time charge.