Microsoft CEO Satya Nadella warned that the company faced “hard choices” few weeks ago. The company products and solutions weren’t taking them where it wanted to go. Thus the company announced that it is intended to sell its mapping service to Uber and its mobile display business to AOL. Microsoft on Wednesday announced that to cut 7,800 jobs along with a reorganization of its Windows Phone unit which has struggled in the mobile market.
Microsoft has now declared that it will take a $7.6 billion-dollar write-off on Nokia more than the $7.2 billion it paid for the company. In a memo given to Microsoft employees, the CEO remarks that he is “committed to our first-party devices including phones,” but considers the wider implications of the announcement. Satya Nadella is sending a message that conventional handset manufacturing and design isn’t something Microsoft wants to be involved in going forward.
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The move represents the second major round of layoffs in a year for Microsoft, which cut some 18,000 jobs a year ago as part of its effort to integrate the Nokia handset division. Most of the cuts at the US tech giant will be in the phone division, and the company will write down the value of its phone business acquired from Nokia by some $7.6 billion. The good news amongst all this is that the company is not giving up on its Windows Phone efforts, though big changes certainly seem to be on their way. This is what CEO Satya Nadella said in an email sent to staff:
“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family.”
“In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”
It is another way of saying that we might see fewer devices in the future. Microsoft has launched an array of low cost hardware in the past year or so, with several different models of the same hardware. A bit more focus here would, indeed, benefit everybody.
Nadella does explicitly refer to flagship devices, saying that the company tends to limit its focus to three consumer segments (value, business, and flagship phones). After buying Nokia, Microsoft was in the position of owning its own primary distribution channel – writing off the company could mean that it intends to partner up again with other companies to bring flagship devices to market. According to Nadella, search is a core feature of everything Microsoft is doing, and a technology that impacts Cortana, Office 365, Windows 10, and Azure, Microsoft’s cloud platform.
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Today’s announcement also puts last week’s rumour about Microsoft exploring Android-related options for the future of its mobile division in more contexts. While it still dominates the market for personal computers, Microsoft has struggled in the market for mobile devices, the majority of which are powered by the Android system or Apple’s iOS. Microsoft plans to start rolling out Windows 10 in late July, introducing a new operating system which can be used to power not only personal computers but a range of mobile devices.