Microsoft Cuts 7,800 Jobs from Smartphone Division, Refocuses Failed Mobile Strategy

by Matt Klassen on July 9, 2015

Like many before Microsoft has found it difficult to compete in the global smartphone market, simply outclassed by the likes of competing platforms Android and iOS. Now, like Blackberry before, Microsoft is changing its smartphone strategy, shifting away from a focus on growing its smartphone business towards developing a more comprehensive “ecosystem” of Windows products.

That means, unfortunately, that the entirety of the company’s smartphone division has now become largely redundant, as phone operations have already been shifted to the Windows devices group, and so with that CEO Satya Nadella made good on his continued promise to streamline his company, slashing 7,800 jobs (approximately 6 percent of its workforce) from the company’s phone hardware segment.

Now that isn’t to say that Microsoft is getting out of the smartphone business altogether, but again like Blackberry before it, the company is simply working to identify its core competencies, thus stripping off extraneous initiatives in an effort to refocus itself on where it can be most effective.

Along with the announcement of job cuts, Microsoft also revealed it would take a $7.6 billion accounting charge related to its acquisition of Nokia’s mobile division, evidence that the company’s attempts in the smartphone market have reaped disappointingly little. That said, the company is still committed to delivering smartphones, but smartphone growth has now become secondary to growing its overall ecosystem of Windows-related devices.

“I am committed to our first-party devices, including phones,” Microsoft CEO Satya Nadella said in the email to employees yesterday. “However, we need to focus our phone efforts in the near term while driving reinvention. 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…In the near-term, we’ll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility.”

Simply put, Microsoft is both shifting its role in the mobile market to provide comprehensive communication services to select demographics, and the company is likely preparing for a more comprehensive approach to mobile solutions that the growing Internet of Things market will surely demand.

As part of Nadella’s mandate when he took the position of Microsoft CEO was to refocus the company on what it did well, and so rather than attempting to compete with Android and iOS in a global smartphone market, Microsoft has now said it will narrow its focus to three types of customers: “business users who want strong management, security and productivity apps;, buyers at the low end of the market looking for inexpensive phones; and Windows fans.”

The company will no longer put resources into competing in the smartphone market as a whole, and will (again much like Blackberry) direct its significantly reduced mobile resources towards the few areas it does well, stripping away anything and everything that resides outside its core mission.

While the company’s continued layoffs are a tragic by-product of corporate restructuring, looking back one could see this announcement looming on the horizon. In June Microsoft sold several of its key mobile assets to AOL, including its mapping business and ad sales, and the company recently announced that former Nokia boss turned Microsoft mobile head Stephen Elop was leaving the company.

All that to say, as much as the mobile market needs a third option to break the combined dominance of Android and iOS, still many years later no contender has emerged, and the likes of Microsoft and Blackberry have realized that if they want to survive in this current mobile landscape, they’re going to have to change their focus.

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Written by: Matt Klassen. Follow by: RSS, Twitter, Facebook, or YouTube.

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