Recently appointed CEO Satya Nadella announced the largest layoffs in Microsoft’s 39 year history today, with a staggering 18,000 jobs on the chopping block. The goal, according to Nadella is to “simplify the way we work to drive greater accountability, become more agile and move faster” signifying Nadella's goal to bring some focus to Microsoft's portfolio of services while also seemingly looking to play down the job losses.

The last large round of layoffs at Microsoft came in 2009, after the stock market crash. That round of layoffs was the previous largest ever at 5,800 positions, and today’s announcement dwarfs that number substantially. But not all departments will share this burden evenly, with the recently acquired Nokia employees getting the brunt of the cuts. In April, Microsoft closed the acquisition of the Nokia mobile phone business, and in the process added 25,000 employees to its payroll. Nadella announced today that 50% of those employees will be let go. Some will be factory workers from some of the in-house manufacturing Nokia owned, and the remainder will be from the handset business itself.

The remaining 5,500 employees to be laid off will therefore come from within Microsoft itself, as it attempts to concentrate on some of its more successful offerings. Excluding the Nokia losses, which are often expected after a merger of this sort, the total number of Microsoft employees being affected is not significantly different than the 2009 cuts.

Former Nokia CEO, now Microsoft Executive VP of Devices and Services, Stephen Elop laid out some of the upcoming changes in his own letter to his employees. Elop promises a focus on Windows Phone, with a near term goal of driving up Windows Phone volume by focusing on the affordable smartphone segments. With that announcement comes the death of the strange Nokia X series of AOSP phones, which debuted at MWC 2014 and were updated with a new model only a couple of weeks ago. While I would make the argument that there was little need for the X series at all, it is doubly frustrating to anyone who bought into the platform to find it killed off so quickly. The X series would be easy prey for cuts like these, because it didn’t really offer anything new to Android or to Microsoft. While it promised to be low cost, retail pricing for the X line was often more than the low cost Lumia phones. The X series had no place in a Microsoft owned Nokia, and should have been killed a while ago.

Elop also announced that they would continue to work on the high end phone range as well. Historically Windows Phone has suffered selling flagship models for many reasons, but it appears that they are not ready to give up the fight in this market yet. He also specifically called out Surface, Perceptive Pixel, and Xbox as new areas of innovation, which likely means those brands are safe for the time being.

The remainder of the Nokia feature phone lines appear to be immediately canceled. This is a segment that has been rapidly shrinking in recent years, with the consumer push towards smartphones, so this is likely a good strategic move by Microsoft. The work done on Windows Phone to allow it to work well on low cost hardware is also likely another big reason for this.

Another major announcement was the closure of the Xbox Entertainment Studios which had a goal of providing original content for Xbox Live members. Several projects such as “Signal to Noise” and “Halo: Nightfall” that were mid production will be completed, but after that content is delivered the studio will be closed.

The full ramifications of these job cuts won’t be known for some time, but it seems fair to say that Nadella wants to put his own stamp on the company. Removing the Nokia X line, the Asha and S40 lines, and an entertainment studio seem like reasonable things to cut if you want to focus your company. Nadella speaks about flattening the organization out, which should help them be quicker to execute on ideas. These kinds of steps, though painful for the employees, can be better for the company in the long run. For quite some time, the perception is that Microsoft is not agile enough to respond to new markets, and it appears that Satya Nadella is trying to focus his company on its strength and that should have a net positive for the company. Microsoft’s next earnings call comes on July 22nd, at which point we may get more details about upcoming plans.


Source: Microsoft

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  • Kepe - Friday, July 18, 2014 - link

    Thank you so much, Micro$oft. You completely destroyed what was left of Nokia and left thousands without a job in Finland. Eflop was injected into Nokia by M$ to bring down share prices enough so they could crab Nokia cheaply. As a Finn I am never buying another M$ product ever again. And I will not recommend anyone else to buy their crappy products either, be it Windows, Office, a Lumia phone or an Xbox, which btw isn't even for sale in Finland yet. I hope their Lumia phone range flops completely and causes billions of dollars of losses in the process.
    I hate you, Microsoft. Die.
  • Gich - Friday, July 18, 2014 - link

    Nokia was doomed since it could not transition to smartphones.
    It stuck too long with Symbian and failed with Maemo and MeeGo long before Microsoft did anything.
  • Klug4Pres - Friday, July 18, 2014 - link

    Symbian was quite good on the messenger (Blackberry) style devices, with the E71 in particular being a great success.

    Their touchscreen transition didn't go so well (N8).

    I found some background here:
  • Gich - Friday, July 18, 2014 - link

    Yeah, they were great... untill they were not anymore...
  • Penti - Friday, July 18, 2014 - link

    N8 did pretty well and Symbian transitioned fine to Qt/QML/QtMobility, capacitive multitouch and so on. Sure Symbian was abandoned by other players, but now Qt is the framework behind Blackberry 10 and so on. Windows Phone was abandoned too so. Just means everything slipped out of their hands. What was really dinosaurs was the S40/Asha line. It's really just the 520 that has done better than N8 in sales per quarter. Nokia's profits in the mobile division didn't slump (to losses) until after the burning platform memo.

    Not needed to have a massive conspiracy here, just a downsizing corporate American and culture crashes. Choosing a platform that didn't exist at the time didn't help.
  • sigmatau - Saturday, July 19, 2014 - link

    The OP is just a troll. They are barely cutting 1k jobs in Finland. I guess the better alternative would have been for MS to let them collapse and then they could have just bought the patents and some of the engineers at auction. Oops, I meant dollar sign Microsoft!!
  • Penti - Saturday, July 19, 2014 - link

    What patents? Most of the patents belongs to the network business any way and they have turned that business around. It's disingenuous or flawed to just go at it at that angle, the mobile business wasn't worth anything after they switched to Microsoft, and the business is worth more without it. Microsoft already got a hold of patents to troll with through other ventures and has some of the best from their own business already. They didn't buy the patents that Nokia sold to NPE's in recent years either. Of course there's no other alternative now, and it hasn't been one since the summer of '11, most of the engineering resources was already gone by that time and they had nothing for them except Qualcomm platforms and Microsoft software. Finland was already massively hit, at least now most that is left have jobs making hardware for Microsoft.
  • Samus - Sunday, July 20, 2014 - link

    I had an E71 and it was the biggest piece of shit. Symbian was complete garbage and grossly outdated.

    Symbian Anna was based on a 10-year-old kernel. That'd be like Windows Phone still running a Windows CE kernel, and then some.

    The future of Nokia was in Meego, and that is perhaps what Elop can be held accountable for ditching. In the same way Apotheker screwed Palm when HP purchased them, Elop screwed Nokia by not letting them move forward with innovation.

    Nokia had far more potential than RIM to transition to a competitive smartphone platform simply because of their simpler devices, greater market reach, design quality, and price. But Nokia did screw up sticking with Symbian as long as they did and Elop took advantage of it.
  • nunya112 - Saturday, July 19, 2014 - link

    so why did MS buy it then if it had nothing in terms of future? I see windows Phone operating system going somewhere. Android has basically stalled in terms of innovation and getting any better. But I see windows 's Operating system for the phone looking really sweet! I think we will see people installing windows phone O/S on any phone the user desires. kinda like the PC market! as long as it's compatible you can run it. and I like that idea. Note 3 with windows O/S on it..... NICE
  • HisDivineOrder - Monday, July 28, 2014 - link

    Certainly, though, you have to admit Elop the Double Agent tanking the company by focusing exclusively on an OS without apps in a market that craves apps was always going to be a losing proposition. If they'd gone Android, they could have used their hardware that was always praised to garner sales and produced some decent numbers. Far more than they ever got with Windows Phone.

    Elop WAS there to drive down the overall price of the purchase. When the Nokia Board rebelled and started up an Android initiative, that's when Ballmer had to bite the bullet, go to the MS board and admit that the strategy was on the verge of outright failure because he'd bet his job on the fact that Nokia's tanking price would make the purchase far cheaper than it wound up being (betting on Elop keeping them Windows Phone focused far longer) and that Nokia's sheer presence would compel OTHER companies to make Windows Phone more of a priority.

    Unfortunately, it didn't work out like he wanted. He loses his job and Microsoft is faced with the choice of losing their primary/only ODM or buying them at a somewhat inflated price. Neither choice was particularly great for MS or Nokia.

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