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After cutting its workforce by around 18,000 over the past year, Microsoft is readying another round of heavy layoffs. The company will cut 7,800 jobs over “the next several months.” Many of the dismissals will come from Microsoft’s phone business, which joined the company’s newly formed “Windows and Devices Group” in June. As part of the merger announcement, Microsoft also revealed it would say goodbye to the last two major Nokia executives still at the company, Stephen Elop and Jo Harlow, in the near future.
It’s clear that CEO Satya Nadella wants Microsoft to be more focused than it has been in recent years. Nadella inherited a company in transition; its nascent Surface business had only just begun to find its feet, and the Nokia deal (arranged by the previous leadership team) had yet to complete. About that acquisition: Microsoft is writing-down a large portion of its value in the coming months — $7.8 billion — which is essentially a tacit admission that paying so much money for the flailing company was not the most financially sound decision.
in an email to Microsoft employees, Nadella says the company remains “committed to our first-party devices including phones,” but wants to “focus our phone efforts in the near term while driving innovation.” What does that mean? Apparently, it means running “a more effective phone portfolio,” with a narrowed focus of “three customer segments.” It says business customers will get “the best management, security and productivity experiences,” value phone buyers “the communications services they want, and Windows fans “the flagship devices they’ll love.” That suggests we’ll see more low-end Lumias, business-focused services and high-end Surface Pro-style devices in the future.
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.
