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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  • Roland00Address - Friday, July 18, 2014 - link

    Windows phone 7 was a great OS, problem was it came out in q4 2010. Android prior to Android 4 was pure junk, problem was we were already on Android 2.3 by q4 2010 and thus Android had a lot of inertia, Android 4 came out q4 2011.

    The Burning Platform memo happened in q1 2011, and the first nokia windows phone 7 devices came out q4 2011.

    So in effect Windows Phone 7 had only 1 year to make any inroads. If Windows Phone 7 came out in 2008 or 2009 we would be saying a different story. By the time Android 4 came out, it had so much inertia there was little chance for windows phone.

    Now a lot of this is armback quartering 4 years later, but all the info was still out there 5 years ago, it was a gamble but the Stephen Elop hooking Nokia up with Windows Phone instead of Android was the very definition of high risk yet possible high reward and we knew this in 2010.
    Reply
  • eanazag - Friday, July 18, 2014 - link

    Windows Phone 7 to 8 upgrade path is the real failure. They kept segmenting the market artificially. The single core phones sucked. Reply
  • eanazag - Friday, July 18, 2014 - link

    I understand the job loss sentiments; the number in the states of employees being dropped is large. That is a huge number.

    With that being said, Nokia shot itself in the shoulder and hip by clinging to Symbian. It simply sucked - I don't understand those comment-ers who liked it. What Nokia is doing now is pretty decent, but still hamstringed by Microsoft's lack of concern for this market (Windows Phone OS).

    What remains to be seen is if they pursue the right ideas in the right ways. It is not that they miss the market. It is just that they make poor decisions early on and cling to them till the outrage gets too loud to ignore. This is a running theme. Cutting 25,000 employees won't fix that. They could probably cut 100 decision makers and right the ship instead.

    A recap of the Eff-up:

    Windows Mobile - crappy browser and no effort for v5 & 6; 7 was a keep the user on the desktop mentality along with no apps and leaving early adopters high and dry & 8 is a decent attempt but lagging behind competitors.

    Windows desktop -
    Poor certification program execution = what I mean is that Windows 8.0 should have been tablet or touchscreen device only. They could have then kept Windows 7 front and center for pure desktop environments. This also happened partially with Vista where certified hardware was too weak for the OS and pretty much every user had to go out and upgrade their brand new computers right after the bought it; for the enterprise side: no partner compatibility commitment and sloooowww development (antivirus was not straight for a whole year and device compatibility [printers - yes you HP] was non-existent on current models). Microsoft simply needs to be more strict with the stickers and their hardware partners because consumers bear the brunt of the hardware partners' mistakes.

    Windows Server - this has actually been decent. I don't agree with killing home server, but they should have made a cheaper standard version for advanced home users like me.

    Xbox - too greedy and too easy for the NSA to take advantage of (kinect + always on internet). These poor decisions will linger eventhough they retract them. I say NSA because their mouths' (General Alexander was getting happy in his Star Trek chair over the product announcement) were watering with the capabilities of in home surveillance across the world with Xbox's capabilities and MS's inability to strongly implement security mechanisms.

    Ima quit here. Who has time to go over all MS's faux pas's?
    Reply
  • damianrobertjones - Friday, July 18, 2014 - link

    "This also happened partially with Vista where certified hardware was too weak for the OS and pretty much every user had to go out and upgrade their brand new computers right after the bought it"

    SHOCKING that companies like ACer releasing desktops with only 256MB ram... MS got the blame for that one which was VERY unfair. The computer could run Vista, hence the certificate, even though it ran like rubbish
    Reply
  • damianrobertjones - Friday, July 18, 2014 - link

    "Nadella announced today that 50% of those employees will be let go."

    Do you care about the others from MS as well? I'm thinking that you're just trolling. Did you care when 40% staff from the company I work for were let go? What about when other companies did it?

    MS actually saved Nokia and, frankly, look at the bigger picture instead of thinking with your emotions. This is BUSINESS! The people working there, be they talented, will have no issues securing a new position elsewhere.
    Reply
  • uditrana - Friday, July 18, 2014 - link

    As someone who lives in the area and knows some of the people who have been laid-off, this is not true. Microsoft has been collecting bloat (especially from overseas) and now is letting them go. It provided a solid well-paying secure job. Now they are forced to go find another place and even though there is Amazon and (a small) Google presence, neither of them will be looking to add bloat. Many will forced to move and their lives will be thoroughly disturbed Reply
  • piiman - Saturday, July 19, 2014 - link

    Life's a bitch suck it up Reply
  • nunya112 - Saturday, July 19, 2014 - link

    But what are your options? Apple pfft Linux no matter the build can't get it's act together and can't get developers to develop for it YET! (granted Steam/Valve is getting there)

    With Android pretty much stalling in terms of innovation and features. I see windows phone actually going somewhere. and you aill all get your jobs back soon enough :)
    Reply
  • Roland00Address - Friday, July 18, 2014 - link

    Please tell me they are losing jobs so they can hire more people and improve certain things faster, not just improving the company bottom line by removing costs. Reply
  • Kepe - Friday, July 18, 2014 - link

    Nope, they are just saving money. Reply

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