Sharpened focus means thousands of job cuts
Just two weeks ago, Microsoft boss Satya Nadella warned he would be making "some tough choices in areas where things are not working" when revealing the company's new mission statement, and today he did just that. In an open email to employees, Nadella said Microsoft will eliminate 7,800 jobs over the course of the next several months, most of which will affect the company's phone business.
Microsoft will also write down approximately $7.6 billion related to assets associated with its acquisition of Nokia's mobile division, which it only acquired a year ago in a deal valued at $9.4 billion. The hefty charge isn't really surprising, though the 7 percent reduction in global staff is probably more than most anticipated.
"I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention," Nadella said in his email. "We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family."
Looking at the Microsoft's short-term future, Nadella said the job cuts and overall restructuring will allow the company to run a more effective phone portfolio, one that will have better products capable of getting to market faster than before. Nadella's phone strategy also includes a narrower focus in which Microsoft will cater to three core customer segments.
"We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love," Nadella said.
Microsoft's longer term goal for its devices segment is to spark innovation and create new categories that tie into the Windows ecosystem. The focus will be on mobility and being able to share experiences across multiple devices, including phones.
It remains to be seen what will come of Microsoft's smartphone business, though it's quickly becoming clear that Nadella has different plans in mind than the previous boss, Steve Ballmer. Microsoft acquired Nokia while Ballmer was still in command, a gamble that hasn't paid off. Now it's up to Nadella to stop the bleeding and find a way to be profitable in mobile.
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