Microsoft said Thursday that it will eliminate up to 18,000 jobs, the largest round of layoffs in company history. Most of those cuts come from Nokia, which Microsoft recently acquired for $US7.2 billion in a transaction that formally closed in April.
It’s now clear that Microsoft’s new CEO, Satya Nadella, thinks the Nokia acquisition was a big mistake.
Microsoft announced it was buying Nokia last year when former CEO Steve Ballmer was still in charge. According to one report from Businessweek, Ballmer threw a fit when the board originally denied his request to buy Nokia. Ballmer eventually got his way, but the Businessweek story implied that the contention with the board was the beginning of the end for Ballmer. He eventually decided to retire and Nadella got the job several months later.
Since Nadella took over, he’s distanced himself from Ballmer’s mission of making Microsoft a “devices and services” company. Ballmer thought Microsoft should shift to making hardware and the software and apps that power it, the same strategy that has made Apple’s mobile business a roaring success. That was a big driver behind the Nokia acquisition.
But Nadella has all but eliminated “devices and services” from Microsoft’s vocabulary in recent months. Instead, he now touts a “cloud first, mobile first” strategy, a mushy mantra that apparently means he wants Microsoft to create the productivity tools, apps, and services people need no matter what kind of gadget they’re using. For example, Nadella finally pulled the trigger on Office for iPad this spring. And much of Microsoft’s marketing recently has shown a willingness to make even more stuff for Android and iOS.
Tuesday’s announcement that thousands of Nokia employees were going to lose their jobs is perhaps the biggest signal yet that Nadella thinks the Nokia acquisition never should have happened and that Microsoft should focus less on hardware. It’s a waste of time and effort to invest so much in Windows Phones from Nokia that have failed to gain significant market share in a world dominated by the iPhone and Android.
Nadella recognises the reality of that situation. Ballmer did not.
This is Nadella trimming the fat and cleaning up the mess Ballmer left him. It’s a harsh move, but a necessary one if Nadella’s software and services-driven mission for Microsoft is going to succeed.