MS swings mobile strategy into action with layoffs

18 Jul 2014

The new Microsoft CEO Satya Nadella has now taken action. Microsoft is cutting 18,000 jobs and 12,500 of them are in the Nokia Devices and Services division. I wrote an analysis about Microsoft's mobile efforts in February and also analyzed the future of mobile strategy and job cuts at Microsoft.

Our prediction was that Microsoft might even cut over 50% of former Nokia staff. Now that 25,000 employees moved from Nokia to Microsoft (and some factories, like India, were closed and not moved to Microsoft at all), this is actually happening. We also predicted Microsoft must offer its key products, e.g. Office, to Android and iOS too, not only for WP. It has already decided to do so. The Telecom Asia prediction has been thoroughly accurate.

We still have many questions regarding what Microsoft is going to do in mobile. Now it also plans to shut down Nokia X, the Android product series, and will totally close the unit that has focused on lower costs phones in Finland. It means Microsoft plans to also have Windows Phone devices in lower cost categories. The low costs phones are especially important in many emerging markets, also in Asia.

These decisions have been necessary. Microsoft couldn’t justify the big organization with low sales and market share. The whole handset business has entered a quite mature phase, and Samsung is also starting to have problems with it. Samsung issued a profit warning a couple of weeks ago and the main reason was weaker than expected mobile phone sales. New users are buying lower cost phones with lower margins, and people have no need to update their high end phones all the time. The growth in mobile is moving to other areas.

I believe there will much more news from Microsoft's mobile business during the next two years. They really must turn it around and acquire more market share, or shut it down (or sell it to the Chinese like Google did for Motorola). It is always important to remember that mobile strategy for Microsoft is much more than its own handsets and tablets, and even more than the Windows Phone operating system. Their crucial need is to get their important products, like Office and enterprise solutions smoothly to the cloud and all kinds of mobile devices. There are many ways to do that, but I think they still struggle to find one working path.

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