News & Analysis

Has Microsoft given up on the Windows Phone?

- July 9, 2015 2 MIN READ

Microsoft has today announced that it is “restructuring” its smartphone business, cutting up to 7,800 jobs and writing off $7.6 billion in assets mostly related to Nokia Devices and Services.

The acquisition of Nokia last year, by former CEO Steve Ballmer, was heralded at the time as a way for the Windows Phone operating system to finally compete with iOS and Android by securing Windows a dedicated manufacturer after others like HTC and LG had given up on it. Now, the company has admitted that “the future prospects for the Phone Hardware segment are below original expectations,” with the Windows Phone having just 3.8 percent market share in North America.

Signs of the decision have been around for a while: the 7,800 job cuts follow the 18,000 cuts announced last year, most of those also related to the phone business. Microsoft had also announced that Stephen Elop, the former Nokia chief who became a senior Microsoft executive following the acquisition, would be leaving the company last month.

Microsoft CEO Satya Nardella wrote in an open letter to staff that the decision has been made to shift the company’s strategy from growing a standalone phone business to growing and creating a “vibrant Windows ecosystem.”

“I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention,” he wrote.

“We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software. We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.”

Effectively, this means Microsoft will be focused on bringing apps like Outlook and its Office suite to other devices.

Microsoft will take an impairment charge of approximately $7.6 billion related to assets associated with the Nokia acquisition, as well as a restructuring charge of around $750 million to $850 million.

Nardella also highlighted the company’s focus on growing its search business. Microsoft recently partnered with AOL, with Bing set to power search and advertising across AOL’s suite of sites. He said Bing last year grew to 20 percent query share in the US.

Image: Microsoft CEO Satya Nardella. Source: Windows.