The job cuts announcement is an acknowledgement that its 2013 $7.2 billion purchase of Nokia was never going to help paltry sales of its Windows Phone, and that it needed a new approach.
Microsoft said it would also write down about $7.6 billion related to its Nokia business.
The cuts indicate that Microsoft will likely focus its mobile efforts on its high-stakes Windows 10 software release, due in late July, rather than on developing smartphones, analysts said. The software’s apps are supposed to work across desktops, tablets and phones with little tweaking.
The company is betting that the popularity of Windows on desktop PCs will lead to more apps for the mobile version of Windows and entice more consumers to buy its phones.
“This mobile strategy going forward is the best they could possibly do,” said Forrester analyst J.P. Gownder.
Wednesday’s announcement is the second round of job cuts since Satya Nadella became chief executive in February 2014. Microsoft said last July it would slash up to 18,000 jobs.
Last month, the company struck deals to hand over much of its advertising business to AOL and sell mapping assets to Uber.
Narrowing its focus in mobile will allow Microsoft to devote resources to the areas where it is strongest, such as software and cloud development, said Ben Bajarin, an analyst at research firm Creative Strategies, noting that its mobile phones served customers “from the low end to the premium tier.”
Microsoft has struggled to break into the mobile market, which is dominated by Apple Inc and Google Inc’s Android. Its Nokia acquisition was an attempt to control both phone software and hardware as Apple does.
Some analysts say the job cuts may mean the beginning of Microsoft’s exit from mobile. Yet because consumers have shifted more of their time to mobile, it is imperative for Microsoft to remain in the market through a successful Windows 10 launch, said Daniel Ives, analyst at FBR Capital Markets.
“They’re going to continue to be a tertiary player in mobile unless something dramatically changes,” Ives said. “Nokia was that Hail Mary acquisition that was clearly a failure.” – Reuters