Microsoft to Cut 7,800 Jobs, Rethink Smartphone Strategy

Pretty terrible news out of Redmond today — 7,800 people will lose their jobs as Microsoft leadership more or less acknowledges that their Windows Phone strategy is failing. Microsoft will restructure accordingly, while writing off a massive loss on their purchase of Nokia’s handset division.

Today’s press release leads off with the announcement of the job cuts, which will mostly affect the handset division that had come over from Nokia. Windows Phones haven’t been able to crack three or four percent of market share in the smartphone world, prompting Microsoft to admit that what they’re doing with phones isn’t working. After buying the division for $7.2 billion in 2013, Microsoft is now writing off $7.6 billion worth of assets related to the acquisition and incurring restructuring charges of between $750 million and $850 million.

In the release, CEO Satya Nadella is quoted as saying, ‘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.’ It’s not clear what that will mean in practice, but if Microsoft is looking at the their current phone strategy as a failure, it’s likely we’ll see far less Lumia devices than we saw come out of the shotgun approach the company had been taking. Microsoft is still planning high-end Lumia devices alongside the Windows 10 launch this year, and while we’ll surely still see some low-end and mid-tier devices, we’ll likely see fewer choices than before as Microsoft looks to tighten up their device strategy.

As for the job cuts, it’s just another reminder that while acquisitions might be painful for the companies involved, they’re almost never good news for anyone lower down on the ladder. All the best to those 7,800 as they cope with today’s news.

Photo Credit: Bloomberg / MarketWatch

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