The firm also said it would post a $950m (£646m) writedown, part of which is to cover redundancy payments.

A union official suggested the firm had cancelled plans to manufacture further handsets of its own, although this has not been confirmed.

The move comes just two years after the US company paid $7.2bn for Nokia's handset business.

Last week, a study indicated Windows-powered handsets accounted for less than 1% of global smartphone sales over the first three months of the year.

Microsoft is also in the process of selling its Nokia-branded feature phones business.

Surface phone?

Microsoft said up to 1,350 of the job cuts would be made in Finland as a result of the latest announcement.

"My understanding is that Windows 10 will go on as an operating system, but there will be no more phones made by Microsoft," said a union representative.

A statement issued by Microsoft's chief executive did not make clear if this was indeed the case.

"We will continue to innovate across devices and on our cloud services across all mobile platforms," said Satya Nadella.

The company has promised to provide more information when it posts an earnings update in July.

But one expert said he still believed it still had plans for new handsets.

"The writing has been on the wall for some time about Microsoft's remaining smartphone operations in Finland," said Ben Wood from the CCS Insight consultancy.

"But Nadella's vision for Windows 10 is predicated on delivering the operating system to any screen, whether its a watch, a giant TV or a phone.

"So, Microsoft will continue to support smartphone licensees - including Alcatel, Acer and HP - for as long as it can.

"And I think we will eventually see a Surface-branded phone emerge as well.

"But that will be so Microsoft can show what the art-of-the-possible is for business-targeted devices - similar to what it has done with its Surface tablets and laptop - rather than trying to sell tens of millions of units itself to consumers."

(BBC)