Microsoft cuts 7,800 jobs after Nokia gamble
In a bid to restructure its embattled phone hardware business, Microsoft (MSFT) on Wednesday said it would shed as many as 7,800 positions and take a $7.6 billion hit on its Nokia phone-handset unit.
The move comes 14 months after Microsoft purchased the company's handset unit for $7.2 billion, and includes the elimination of about 2,300 jobs in Finland, where Nokia is based.
"We need to focus our phone efforts in the near term while driving reinvention," CEO Satya Nadella wrote in an emailed statement.
The layoffs follow June's shakeup in senior engineering leadership, with Nadella, who became CEO last year, purchasing cloud software and mobile makers while getting rid of units not key to his strategy.
When Microsoft acquired Nokia's phone business, it was the largest seller of Windows-based smartphones. However, despite generally positive reviews of the software, most of the world has long standardized on either Apple (AAPL) iPhones or handsets running Google's (GOOG) Android mobile operating system.
Having a viable offering of devices is key to the strategy outlined by Nadella. Microsoft "will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group," his statement said. That raises the question of whether creating incrementally better phones can do anything to stop the twin Google and Apple juggernaut, which has taken the lead in the entire market, from low-end to top.
One clue is that Nardella wrote of narrowing focus to "three customer segments." He hopes to target business users, a traditional strength of Microsoft's, with device management, security, and productivity: three areas of particular importance to corporate users.
However, there's been a major shift in how business users consider hardware. A growing trend has been people using their own consumer devices, whether phones or tablets, in a work setting. Nardella may hope that features tailored for the comfort of an IT department will hold sway, but the users themselves have been the driving force in many companies, and if Microsoft cannot convince them that they want Windows-based phones, IT departments won't be able to do much.