Microsoft Making New Shift; Laying Off 7800 in Phone Division; Nokia Purchase Write-off

[dgstorm]

The latest moves from Microsoft almost look like the company is throwing in the towel in the battle against the iPhone and Android smartphones. It turns out that Ballmer and Elop's last move for Microsoft to buy Nokia will have cost the company billions of dollars. In 2013, Microsoft purchased Nokia's hardware division for $7.2 Billion USD, but now the company will soon account for this purchase as a massive write-down on their financials. On top of that, Microsoft is also planning another round of layoffs to the tune of 7,800 people across the globe. A majority of these layoffs will be in Microsoft's mobile phone division.

Despite this seemingly desperate news, Microsoft isn't actually giving up on smartphones. Instead they are refocusing on the Windows ecosystem, and will be using future mobile devices to push their services and products. Basically, instead of trying to compete in the regular consumer mass market, Microsoft will narrow their attention to three distinct markets: enterprise and security, value phones, and a flagship phone for Windows fans.

Microsoft's CEO, Satya Nadella released the info in an email this morning. One of the things he specifically mentioned is that the company is "committed to our first-party devices including phones". He also said, "...we need to focus our phone efforts in the near term while driving reinvention. 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." At the end of his email he added, "I know many of you have questions about these changes. I will host an employee Q&A tomorrow to share more, and I hope you can join me."

We are curious to see the details of Microsoft's new strategy. Regardless, it looks like it is still tough for Microsoft to live-down Ballmer and Elop's "legacy" of mistakes. You can read the full email at the source link below, or in the thread below.

Source: Microsoft

 

[dgstorm]

Here's the full email from Nadella to the employees of Microsoft,

Team,

Over the past few weeks, I’ve shared with you our mission, strategy, structure and culture. Today, I want to discuss our plans to focus our talent and investments in areas where we have differentiation and potential for growth, as well as how we’ll partner to drive better scale and results. In all we do, we will take a long-term view and build deep technical capability that allows us to innovate in the future.

With that context, I want to update you on decisions impacting our phone business and share more on last week’s mapping and display advertising announcements.

We anticipate that these changes, in addition to other headcount alignment changes, will result in the reduction of up to 7,800 positions globally, primarily in our phone business. We expect that the reductions will take place over the next several months.

I don’t take changes in plans like these lightly, given that they affect the lives of people who have made an impact at Microsoft. We are deeply committed to helping our team members through these transitions.

Phones. Today, we announced a fundamental restructuring of our phone business. As a result, the company will take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million.

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. 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.

In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group. We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software. 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.

In the longer term, Microsoft devices will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly. Our reinvention will be centered on creating mobility of experiences across the entire device family including phones.

Mapping. Last week, we announced changes to our mapping business and transferred some of our imagery acquisition operations to Uber. We will continue to source base mapping data and imagery from partners. This allows us to focus our efforts on delivering great map products such as Bing Maps, Maps app for Windows and our Bing Maps for Enterprise APIs.

Advertising. We also announced our decision to sharpen our focus in advertising platform technology and concentrate on search, while we partner with AOL and AppNexus for display. Bing will now power search and search advertising across the AOL portfolio of sites, in addition to the partnerships we already have with Yahoo!, Amazon and Apple. Concentrating on search will help us further accelerate the progress we’ve been making over the past six years. Last year Bing grew to 20 percent query share in the U.S. while growing our search advertising revenue 28 percent over the past 12 months. We view search technology as core to our efforts spanning Bing.com, Cortana, Office 365, Windows 10 and Azure services.

I deeply appreciate all of the ideas and hard work of everyone involved in these businesses, and I want to reiterate my commitment to helping each individual impacted.

I know many of you have questions about these changes. I will host an employee Q&A tomorrow to share more, and I hope you can join me.

Satya

 

[cereal killer]

Hate to see anyone lose their jobs, but it looks like Nadella is going to take care of them in some way (perhaps a nice severance package). I'm looking forward to see what MSFT's next batch of flagships will bring. I'm holding on to my Icon right now and will jump on their next Windows 10 Mobile phone.

Really excited about Windows 10 and the changes at MSFT. Hitting all 3 demographics is a great strategy for them and I like that they acknowledged the importance of the speed to market with their new products. Thats going to be key.

I feel like I did back in the day when Android was just a baby. Couldn't wait for what was going to happen next. Devices, updates, features etc. It's exciting times

 

[Jonny Kansas]

I'm not concerned with WinMo, but looking forward to what MSFT does next for sure.

 

[tech_head]

They should have asked me and I could have saved them billions.
You can't buy your way into marketshare. Ask HP about that Compaq purchase.

 

[kodiak799]

MS seems to be embracing the shift, finally, to supporting their products on Android and IOS. The surest way to protect their cash cow is not to force the geometrically growing user base in mobile to search for alternatives.