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Microsoft to Nokia Operations: 'Click'
First came the alliance, and then the acquisition... and now, the adios.
On Wednesday, Microsoft CEO Satya Nadella extinguished any lingering doubts about where he stands on support for the former Nokia handset business. In a company email, Nadella outlined plans to restructure Microsoft's phone hardware business and write off what pretty much amounts to all of the value of last year's $9.5 billion acquisition of Nokia Devices and Services.
As cited in the official press announcement, Nadella wrote to employees: "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. In the near-term, we'll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility."
Of course, said "reinvention in mobility" was an expectation Microsoft had in bonding with Nokia in the first place. When Microsoft and Nokia first aligned in August 2009, they heralded the alliance as "a groundbreaking, enterprise-grade solution for mobile productivity," as detailed in a No Jitter post. Five years is a long time in the tech industry, long enough for leadership change and renewed thinking about what does and doesn't make for good strategy in enterprise mobility, productivity, and communications.
For those baffled by Microsoft's decision to acquire Nokia in the first place, yesterday's news is no doubt a bit of "told you so." No Jitter blogger Dave Michels, an analyst at TalkingPointz, nailed it in his think piece at the time of the acquisition announcement: "The biggest problem is vision. Ballmer is a lame duck ... currently implementing his vision and strategy which includes doubling-down on mobility. The problem is, by the time this acquisition is done, the new CEO will be in-place and it is unlikely he/she will have the same vision."
Nadella approaches mobility with a broader view than did former Microsoft CEO Steve Ballmer, in regard to both devices and operating systems. As No Jitter blogger Michael Finneran, president of dBrn Associates, noted just last month, Microsoft is getting a "whole lot more mobile friendly" under Nadella's watch. As one example, he pointed to Phone Companion, a Windows 10 capability that will let users connect their Windows PCs to whatever phones they own -- whether those be running Windows, Android, or iOS.
As Nadella explained in his email to employees, going forward, Microsoft will center its mobility initiatives on three customer segments "where we can make unique contributions and where we can differentiate through the combination of our hardware and software." Those segments are:
The unfortunate side effect of Nadella's goal of running a "more effective phone portfolio" is a layoff of up to 7,800 people globally. In realigning its mobile operation, Microsoft said it will take an accounting charge of approximately $7.6 billion related to the assets associated with the Nokia acquisition -- the write-off I mentioned above -- as well as a restructuring charge amounting to between $750 and $850 million.
Microsoft said it will take the write-off in the fourth quarter of fiscal 2015, and that the workforce reductions will take place over the next several months.