Only slightly more than a year since acquiring Nokia as the cornerstone of its mobility strategy, Microsoft Corp. announced on Wednesday that it is drastically reducing its staff in that division and taking a multi-billion dollar hit in writing off its assets. Microsoft will restructure accordingly, while writing off a massive loss on their purchase of Nokia’s handset division. Microsoft bought aQuantive for $6.3 billion in a bid to increase its role in the online ad sector that was dominated by the likes of Google and Yahoo. The company has already decided to sell it’s online display advertising business to AOL, while it narrows its focus on search.
Analysts say Nadella is making a big bet that people will use new versions of Microsoft’s software on a wide variety of computing devices – including tablets, video game consoles and even holographic headsets.
“We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family”, Nadella said.
In a memo distributed to Microsoft employees, Nadella remarks that he is “committed to our first-party devices including phones”, but consider the wider implications of the announcement.
While Microsoft will not stop making smartphones, Nadella on Monday said Microsoft would no longer focus on the growth of its own smartphone business. He said Microsoft will make a smaller number of phones for business users, low-priced models for “value” buyers and “flagship devices” for Windows fans. It will also cut 7800 jobs as part of a restructuring plan.
Microsoft reported 118,600 employees as of March 30, 2015 with approximately half of those located in the United States. The bloodletting will mostly impact the company’s phone business, which has been adrift for some time. The operation has struggled for profitability and seen little growth in its share of the global phone market.
This is the second major restructuring that Microsoft has undertaken since Satya Nadella took over as CEO in February 2014.