Microsoft smartphones are dead: company fires 1,850 employees, announces focus on software development
By Paul K.
May 25, 2016, 4:54 AM
Last week, we got the news that Nokia is staging a comeback to the smartphone business and will be licensing its name to newly formed company HMD Global, who will manufacture and sell Nokia-branded handsets. As you may know, this year, Nokia regains its rights to put its name on smartphones, while Microsoft still held on to the Nokia brand for feature phones. However, HMD went ahead and purchesed the rights to the Nokia name for feature phones, while Foxconn bought the facility where said phones were manufactured.
Microsoft, naturally, issued a press release, letting everyone know that it's selling its rights to the Nokia name as well as the factory in question, but the text contained a line that was a bit offbeat and its very existence in a press release that concerned feature phones raised some concerns. The line in question reads:
Microsoft will continue to develop Windows 10 Mobile and support Lumia phones such as the Lumia 650, Lumia 950 and Lumia 950 XL, and phones from OEM partners like Acer, Alcatel, HP, Trinity and VAIO
An odd choice of words there – it made it seem like Microsoft would be scaling down yet again, possibly focusing entirely on software development. Well, to the disappointment of many Lumia fans, it seems that is the case.
Executive VP of Windows and Devices Terry Myerson sent an internal letter to all Microsoft staff, letting them know of some impending changes within the company. Yes, you guessed it, Microsoft will be scaling back on smartphones again, which will, in Myerson's words, “impact up to 1,850 jobs worldwide, up to 1,350 of which are in Finland".
This could be the last high-end Lumia we get to see for a while
The VP then continues to explain how Windows 10 is currently installed on more than 300 million active devices, Surface and Xbox satisfaction is at a record high, and earlybird developers are loving the HoloLens (Microsoft's cool augmented reality, a direct answer to VR). However, the Microsoft smartphones continue to be preferred only by a small group of companies and individual consumers. For this reason, the company has made the decision to "focus" its phone hardware efforts.
Meanwhile, Redmond will continue its software development efforts for multiple platforms. The goal is to reach as many consumers as it can with its services, keeping its name on users' minds. It will also continue to work on the mobile version of Windows 10, looking to turn it into an appealing platform, which more 3rd party OEMs will want to build phones for.
So, in other words, Microsoft smartphones may not be entirely gone, but we can expect much less devices to come out of the company in the following years. The letter and press release shy away from talking about any work on hardware and instead insist that the company will focus on "security, manageability and Continuum". And what of the rumored Surface phone? Unfortunately, there is no way of knowing if it will ever exist.
You can find the official Press Release by CEO Satya Nadella, as well as the letter from the Executive VP below.
REDMOND, Wash., May 25, 2016 /PRNewswire/ -- Microsoft Corp. on Wednesday announced plans to streamline the company's smartphone hardware business, which will impact up to 1,850 jobs. As a result, the company will record an impairment and restructuring charge of approximately $950 million, of which approximately $200 million will relate to severance payments.
"We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same," said Satya Nadella, chief executive officer of Microsoft. "We will continue to innovate across devices and on our cloud services across all mobile platforms."
Microsoft anticipates this will result in the reduction of up to 1,350 jobs at Microsoft Mobile Oy in Finland, as well as up to 500 additional jobs globally. Employees working for Microsoft Oy, a separate Microsoft sales subsidiary based in Espoo, are not in scope for the planned reductions.
As a result of the action, Microsoft will record a charge in the fourth quarter of fiscal 2016 for the impairment of assets in its More Personal Computing segment, related to these phone decisions.
The actions associated with today's announcement are expected to be substantially complete by the end of the calendar year and fully completed by July 2017, the end of the company's next fiscal year.
More information about these charges will be provided in Microsoft's fourth-quarter earnings announcement on July 19, 2016, and in the company's 2016 Annual Report on Form 10-K.
Microsoft (Nasdaq "MSFT" @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more.
To: Microsoft - All EmployeesFrom: Terry Myerson Date: Wednesday 5/25, 2AM Pacific Time Subject: Focusing our phone hardware efforts
Team, Last week we announced the sale of our feature phone business. Today I want to share that we are taking the additional step of streamlining our smartphone hardware business, and we anticipate this will impact up to 1,850 jobs worldwide, up to 1,350 of which are in Finland. These changes are incredibly difficult because of the impact on good people who have contributed greatly to Microsoft. Speaking on behalf of Satya and the entire Senior Leadership Team, we are committed to help each individual impacted with our support, resources, and respect.
For context, Windows 10 recently crossed 300 million monthly active devices, our Surface and Xbox customer satisfaction is at record levels, and HoloLens enthusiasts are developing incredible new experiences. Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same. Thus, we need to be more focused in our phone hardware efforts.
With this focus, our Windows strategy remains unchanged: 1. Universal apps. We have built an amazing platform, with a rich innovation roadmap ahead. Expanding the devices we reach and the capabilities for developers is our top priority. 2. We always take care of our customers, Windows phones are no exception. We will continue to update and support our current Lumia and OEM partner phones, and develop great new devices. 3. We remain steadfast in our pursuit of innovation across our Windows devices and our services to create new and delightful experiences. Our best work for customers comes from our device, platform, and service combination.
At the same time, our company will be pragmatic and embrace other mobile platforms with our productivity services, device management services, and development tools -- regardless of a person’s phone choice, we want everyone to be able to experience what Microsoft has to offer them.
With that all said… I used the words "be more focused" above. This in fact describes what we are doing (we're scaling back, but we're not out!), but at the same time I don't love it because it lacks the emotional impact of this decision. When I look back on our journey in mobility, we’ve done hard work and had great ideas, but have not always had the alignment needed across the company to make an impact. At the same time, Ars Technica recently published a long story documenting our journey to create the universal platform for our developers. The story shows the real challenges we faced, and the grit required to get it done. The story closes with this:
And as long as it has taken the company, Microsoft has still arguably achieved something that its competitors have not... It took more than two decades to get there, but Microsoft still somehow got there first. For me, that’s what focus can deliver for us, and now we get to build on that foundation to build amazing products.
This copy is for your personal, non-commercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers at https://www.parsintl.com/phonearena or use the Reprints & Permissions tool that appears at the bottom of each web page. Visit https://www.parsintl.com/ for samples and additional information.