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Microsoft to Close Wilsonville Plant, Continues Layoffs

Zacks Equity Research

Microsoft Corp. (MSFT) is planning to close its Surface Hub manufacturing facility in Wilsonville, OR. The process, set to start in September, will see 124 jobs being slashed over the next few months.

Per ZDNet, Microsoft gained the ownership of the plant following its acquisition of Perceptive Pixel in 2012. It manufactured Microsoft’s huge touch-screen computers introduced in 2015.

The news comes just a week after Microsoft announced layoffs as part of its sales overhaul. Notably, a company-wide reorganization is underway for proper resource allocation. Reportedly, some of the workers will be offered jobs in other departments of the company.

It is anticipated that these steps will lower operating expenses, thereby aiding the bottom line going forward. We note that the company has outperformed the S&P 500 on a year-to-date basis. While the index gained 9.8%, the stock returned 13.9% over the same time period.

Will the Shutdown Aid Microsoft?

In mid-Dec 2016, per a Thurrot article, Microsoft officials had confirmed that Surface Hub would be shipped to over 2000 customers in 24 markets by the year end, within nine months of its launch.

In a recent report by Betanews, the product received a Windows 10 Creators Update and a five-year extended hardware service plan. So, the product, with an average selling price over $10,000, is in demand.

Microsoft Corporation Revenue (TTM)

Microsoft Corporation Revenue (TTM) | Microsoft Corporation Quote

We note that the closure of the plant and the subsequent retaining of the useful workforce will be a positive for the company, as it is planning to consolidate the Surface Hub manufacturing facilities. Microsoft is also planning to start the product’s development in Redmond.

It is anticipated that the cost streamlining processes will help Microsoft to better compete with peers like International Business Machines IBM, VMware VMW and Hewlett-Packard HPQ.

Zacks Rank

Currently, Microsoft holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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