Microsoft Cuts 7,800 Jobs As Windows Phones Stall - InformationWeek

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7/8/2015
02:06 PM
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Microsoft Cuts 7,800 Jobs As Windows Phones Stall

Microsoft cuts thousands of jobs and plans to streamline its smartphone business amidst restructuring.

iPhone 6s And 7 Other Smartphones To Watch In 2015
iPhone 6s And 7 Other Smartphones To Watch In 2015
(Click image for larger view and slideshow.)

Microsoft today announced a major restructuring that heavily impacts the smartphone business it acquired from Nokia last year. Thousands of jobs cuts and fewer smartphones mark a grim path forward.

Microsoft CEO Satya Nadella emailed employees this morning with the bad news.

"Over the past few weeks, I’ve shared with you our mission, strategy, structure and culture," wrote Nadella. "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."

First up, job cuts. Microsoft said it plans to eliminate 7,800 positions globally, mostly in its smartphone business. These follow cuts of more than 12,500 made to its phone business last year. Microsoft indicated most of the cuts will be made over the next few months, with the majority of them completed by the end of the year.

Next, a total revamp of the phone business. Nadella said he and Microsoft are committed to its first-party devices, but he wants to see them play a smaller role in a larger ecosystem. Moving forward, Microsoft will concentrate on three essential categories: smartphones for the enterprise, for emerging markets, and for flagship-seeking consumers.

(Image: Gregory_DUBUS/iStockphoto)

(Image: Gregory_DUBUS/iStockphoto)

"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," said Nadella. "We plan to narrow our focus to segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software."

The company plans to write down $7.6 billion in expenses related to the Nokia Devices and Services acquisition. The financial impact will not affect cash flow, according to Microsoft.

Nadella said in the longer term, Microsoft's device business will "spark innovation" and "generate opportunity" for the broader ecosystem.

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Microsoft is also making changes to its mapping business. It recently announced plans to divest its imagery acquisition operations to Uber, which includes employees and other assets. It says this will let it focus better on providing better mapping products.

Last, Microsoft is fine-tuning its advertising business. It plans to concentrate on improving search, while partnering with AOL and AppNexus for display advertising. AOL's portfolio of sites will use Bing moving forward.

The writing has been on the wall for some time with respect to Microsoft's acquisition of Nokia's device business. While Nokia's smartphone unit may not have survived on its own, Microsoft's acquisition of the business has been a near total failure. Combining the OS and hardware teams under one roof did not result in better sales. If anything, Windows Phone has lost market share in recent quarters.

Exactly how Microsoft will reinvent its smartphone business remains to be seen. What sort of phones will it make for enterprise customers? Is the Lumia brand going to vanish? And how will it tempt flagship seekers? Are we looking at a wholesale redesign of the hardware?

The transition to Windows 10 is now more important than ever. Microsoft cannot leave its smartphone platform dangling in the wind for too long, lest it blow away entirely.

Eric is a freelance writer for InformationWeek specializing in mobile technologies. View Full Bio

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impactnow
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impactnow,
User Rank: Author
7/13/2015 | 3:27:58 PM
Transformation needed

Acquisitions unfortunately always look better on paper than they are in reality, they are painful cumbersome and often times budget hogs in reality, especially for tech acquisitions. The cell phone market overall in a state of flux that is frustrating customers--if you have tried to buy a phone lately you know exactly what I am talking about. Hopefully they will figure out something that will work to transform the market for all of us( axe the leases please) and save the remaining employees jobs.

Susan Fourtané
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Susan Fourtané,
User Rank: Author
7/13/2015 | 3:46:04 AM
Re: smartphone market, is not Microsoft strength
Technorati, It's really hard to tell what happens in board meetings. Every business has its secrets. In any case, this fail with the smartphone business was very much expected, as I wrote last year after talking with an analyst on the topic. -Susan
Technocrati
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Technocrati,
User Rank: Ninja
7/12/2015 | 1:26:20 PM
Re: smartphone market, is not Microsoft strength

@Susan   No it doesn't but my point is that even though Ballmer is not active in the day to day at Microsoft - he is still on the board and that is probably a chief reason that Microsoft does give up entirely on this losing proposition.   

I don't know what Elop is doing but since I live in Southern California I get to keep up with Ballmer whether I want to or not.

Susan Fourtané
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Susan Fourtané,
User Rank: Author
7/12/2015 | 5:29:20 AM
Re: smartphone market, is not Microsoft strength
Hi, Technorati. :) I am good, thanks. It doesn't help much now to go back and check the history of the problem. Neither Balmer nor Elop are in Microsoft anymore. What Nadella has to do now is to take what he has and make the best decisions from the options available. -Susan
Susan Fourtané
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Susan Fourtané,
User Rank: Author
7/12/2015 | 5:16:47 AM
Re: smartphone market, is not Microsoft strength
Pedro, That's the problem I still see. A lot of people think that Nokia only made smartphones. Then they thought that the whole company was sold to Microsoft. Nokia had four businesses, from which one was the Devices & Services division. That's the only division that was sold to Microsoft. After that, Nokia focused on its other three divisions: Nokia Networks, Nokia Technologies, and HERE (Mapping and location services). The company is known now as Nokia Networks. Last month, Nokia Networks won two awards. Nokia Networks is also buying Alcatel-Lucent. So, as you see, whatever problem with the smartphone business Microsoft has it's only a Microsoft problem. Nokia has nothing to do with that. The only problem is that the ex-Nokia exmployees who were transfered to Microsoft are now all losing their jobs. Buut that is also a Microsoft problem. -Susan
PedroGonzales
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PedroGonzales,
User Rank: Ninja
7/10/2015 | 12:03:35 PM
Re: smartphone market, is not Microsoft strength
@ susan.I had no idea Nokia had other business. That is the nature of the private sector, when thing aren't doing well layoff are eminent.  that is why my friend always tell me.  Have your resume ready and update all the time, you never know what could happen. I heard somewhere that the severance package is pretty good for large companies.  That could be a time to have a nice vacation.
Technocrati
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Technocrati,
User Rank: Ninja
7/10/2015 | 10:18:55 AM
The Ghost of Ballmer Still at Odds with the iPhone

Rumor has it ( and I am very inclined to believe it ) is that one of the first things Ballmer tried to mandate when he purchased the L.A. Clippers ( for 2 Billion ) was to tell the employees they could no longer have iPhones - they were now to use the Windows Phone !    

I assume they were given them free since they have enough in stock.

Technocrati
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Technocrati,
User Rank: Ninja
7/10/2015 | 10:10:18 AM
Re: smartphone market, is not Microsoft strength

Hi Susan !      How are you ?   I agree with you of course  - I really think they are just wasting their time, but you know how these Conglomerates operate - they hate to admit they cannot compete in sectors they choose to enter.

Wasn't this push by the egomaniac - Ballmer ?   For so many years Microsoft just bought it's way into things it could not produce with relative success and this type of arrogance lead to the smartphone market as well - it is funny.  

Ballmer probably saw that employees were using iPhones and just couldn't stand it - still can't stand it and this illogical push to make ( purchase) their own was born.  It didn't matter that Apple and Samsung had already cornered the market - they were Microsoft.  Could do anything they want with enough cash to see it through.   He (Ballmer) underestimated how difficult this would be and now Nadella is saddled with this bloated and losing initiative.

"Let's go outside the US and push the product" - well that strategy hasn't worked either because people either love the the phone they already have ( iPhone or Samsung ) or can already find a cheap substitute.  

But I am not telling you anything you don't already know !   ;  )  So now we must wait until Microsoft stops lying to itself. 

Susan Fourtané
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Susan Fourtané,
User Rank: Author
7/10/2015 | 7:09:30 AM
Re: smartphone market, is not Microsoft strength
Technorati, let me tell you, Windows phones are a failure. No matter what the will try after this fail. -Susan
Susan Fourtané
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Susan Fourtané,
User Rank: Author
7/10/2015 | 7:06:55 AM
Re: smartphone market, is not Microsoft strength
Pedro, Nokia Networks is doing very well. In fact, they are winning award after award. The handheld business was not the whole Nokia. It was only one of Nokia's four businesses. You shouldn't be disappointed. This fail was expected. Unfortunately, too many employees are paying the consequences of this. -Susan
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