Microsoft said it is cutting jobs as part of an effort to “streamline the company’s smartphone hardware business”, incurring a $950 million restructuring charge as a result.
The company appears to have stopped short of exiting the segment completely, with Satya Nadella, CEO, stating that it will focus its phone efforts “where we have differentiation – with enterprises that value security, manageability and our Continuum capability, and consumers who value the same”.
With regard to its wider mobile efforts, the executive said that Microsoft will “continue to innovate across devices and on our cloud services across all mobile platforms”. It has been making various apps and services available on Android and iOS for some time, in order to extend its reach beyond its own lacklustre mobile platform.
Microsoft’s failure to gain traction in the smartphone market is well documented. Figures from analyst firm Gartner put its share of the sector in the first quarter of the year at less than 1 per cent.
With its own hardware business – acquired from Nokia for around €5.5 billion – not delivering significant volume, Microsoft has similarly not been able to generate substantial support from other vendors.
And the computing giant has been distancing itself from the hardware business for some time. In July last year, it announced 7,800 job cuts and $7.6 billion in impairment charges related to the former Nokia business, and said it would “run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility”.
When its mid-tier Lumia 650 was unveiled in February this year, it was already being suggested that this may be the last in this line, with little colour added at the subsequent Mobile World Congress.
The big question comes with regard to Microsoft’s Windows platform in the mobile market. After it was barely mentioned at the company’s recent Build developer event, Terry Myerson, Microsoft’s Windows chief, said that its intention is to “support the Windows 10 Mobile platform for many years”, while also admitting it is “not the core” of its immediate focus.
But for some time Microsoft, and Nokia before it, was the driver of Windows Mobile volume and, with this off the table, it is not clear why the company would want to continue its investment in the niche platform.
Today’s move comes shortly after a deal was announced to offload much of its phone business to a Foxconn subsidiary and HMD, the latter a new company intending to offer devices under the Nokia banner.
Microsoft said that in line with the new cuts, 1,350 jobs will be lost in Finland, and 500 more globally. Its actions are expected to be “substantially complete” by the end of the calendar year.