Microsoft Corp., struggling to restart its mobile strategy after multiple misfires, early on Wednesday morning announced a further step in dismantling the mobile-phone operations it acquired from Nokia Corp.
The software giant will lay off 1,850 workers, taking an impairment and restructuring charge of approximately $950 million, the company said. It will record the charge in the current quarter in its More Personal Computing segment.
Last summer, Microsoft wrote down $7.6 billion related to its mobile-phone business and laid off 7,800 workers in those operations.
Combined, the charges total a bit more than the $9.4 billion Microsoft spent in 2014 to acquire Nokia Corp.’s handset business.
The latest charge and layoffs follow the sale last week of Microsoft’s low-end phone business to FIH Mobile Ltd., a subsidiary of Hon Hai/ Foxconn Technology Group, and HMD Global Oy for $350 million.
In an email to employees, Terry Myerson, executive vice president of Microsoft’s Windows and Devices Group, insisted that the company isn’t exiting the mobile-phone business. Microsoft, which still makes three phones in its Lumia line, will continue to “develop great new devices,” Myerson wrote.
“[We’re] scaling back, but we’re not out!” Mr. Myerson wrote.
It would be difficult for Microsoft to be less in the mobile phone business that it currently is, though. The market research firm Gartner Inc. last week reported that sales of smartphones running various versions of Microsoft’s Windows software amounted to 0.7% of the market in the first quarter of 2016. A year earlier, Windows’ share of sales came to 2.5%.
The company intends to focus its mobile-phone efforts in areas where the company has “differentiation,” Microsoft Chief Executive Satya Nadella said in a statement. That includes businesses that want to use Microsoft’s technology to manage and secure devices on their corporate networks. Mr. Nadella also touted the company’s Continuum feature, which enables a smartphone running Windows 10 to function as a surrogate PC when connected a video monitor and keyboard.
Increasingly, companies are procuring phones for employees rather than letting workers bring their own devices onto corporate networks, said International Data Corp. analyst John Delaney. In Europe, where Mr. Delaney is based, about a third of all companies now offer employer-owned mobile phones to employees.
The strategy allows those companies to better manage the devices on their corporate networks. That could provide an opening for Microsoft, Mr. Delaney said.
“They are basically giving up on the consumer,” Mr. Delaney said. “It is the right strategy. It would have been good to have done it a bit sooner.”
Microsoft is banking on Windows 10, the latest version of its flagship operating system, to grow that business. Released last summer, Windows 10 is the first version of the operating system that can run on mobile phones and game consoles as well as personal computers.
The company is betting that the vast number of devices running Windows 10–300 million by the latest count–will convince software developers to create the sort of apps that will bring mobile customers to the company.
While it pursues that Windows-centric strategy, Microsoft is also developing technology for rival mobile operating systems. It offers its Office word-processing and spreadsheet software on Apple’s iOS, for example. Mr. Myerson in his email to employees described that approach as “pragmatic.”
The layoffs will hit hardest in Finland, Nokia’s home, where 1,350 jobs will be cut, Microsoft said. The company said the charges include about $200 million severance payments.
Microsoft’s mobile phone struggles stretch back more than a decade. It originally offered Windows Mobile, an operating system for mobile phones aimed at business users, in 2003. But BlackBerry Ltd., first, then Apple Inc.’s iPhone and phones running Alphabet Inc.’s Android operating system outpaced Microsoft. It shifted strategy in 2010, targeting consumers with the renamed Windows Phone software. Microsoft acquired Nokia’s handset business in hope of catching up, which gave the software giant a hardware maker committed to using its operating system. But Nokia, once the global leader in mobile phones, withered on Microsoft’s watch.
“When I look back on our journey in mobility, we’ve done hard work and had great ideas, but haven’t always had the alignment needed across the company to make an impact,” Mr. Myerson wrote in his email to employees.
Source: Market Watch