Microsoft’s foray into smartphone business has proven to be a very expensive one as the Redmond Washington-based company on Wednesday announced plans to disengage 1,850 employees. This is coming on the heels of the company’s retreat from manufacturing smartphones.
For many observers, this won’t come as a surprise considering the downturn being experienced in the sales of the company’s smartphones.
Microsoft said it would eliminate up to 1,850 jobs as a result of cutbacks—with about 1,350 of that figure affecting workers in Finland. Finland is the home base of Nokia–a company Microsoft acquired few years ago. The company also revealed that it would take an accounting charge of $950 million related cuts.
Instead, Microsoft has opted to channel efforts towards where it believes it has “differentiation.”
“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.”
An acquisition that proved too costly
Microsoft’s acquisition of Nokia raised a lot of dust when the announcement was made. The Nokia brand at the time was not making any significant progress in a market largely dominated by iPhone and the Android OS. Microsoft needed to compete, and the Nokia brand presented it a platform to achieve its goals—but things didn’t turn out as expected.
As a result of Microsoft’s acquisition of Nokia’s handset business, 25,000 workers joined the Richmond-based company. That was not to last as the company started feeling the heat, which led to cutting 18,000 jobs in 2014. A vast number of employees who were disengaged at the time were related to the deal.
Microsoft’s smartphone business continued to suffer a downward spiral as competition from other major players in the market got stiffer. This led the company to further disengage additional 7,800 jobs in 2015, while also offering to take a $7.6 billion accounting charge, writing off nearly the entire value of the Nokia deal.
However, Microsoft said in a statement that it is not au revoir to smartphone business as it plans to introduce new ones in the future. This time around, the company’s effort will be channelled towards manufacturing smartphones for business customers who have continued to show more interest in Microsoft’s phone business.
“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,” Mr. Myerson wrote in his e-mail to Microsoft employees.
On Nokia
Last week, Nokia announced plans to re-enter the mobile phone industry. However, the phone company said it would foster a new partnership with HMD global, a newly founded company based in Finland.
Nokia remains a formidable brand in the mobile phone industry despite Microsoft’s acquisition a couple of years back, and still has the capacity to catch the attention of consumers—most of whom still retain memories of how the phone maker dominated the scene decades ago.
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