Microsoft Signs Away Final Traces of Two Year Old Nokia Purchase

It was just 25 months ago today, 25 April 2014, that Microsoft announced that they had closed the acquisition of their purchase of Nokia's phone business.

These last two years have ended up being very tumultuous for Microsoft and its phone business.

Last July Microsoft CEO Satya Nadella announced the companies plans to take a $7.6 billion dollar impairment relating to the Nokia purchase and the layoff of nearly 7,800 employees. There was also a planned restructuring charge relating to these changes and layoffs between $750 and $850 million dollars.

Last week they sold off the feature phone business that was acquired under the Nokia purchase and since then we have heard different discussions and plans for the ailing mobile phone business. Many of the discussions centered around whether or not the company plans to completely pull out of the market, will just lay low for a while or if they are opting to focus on one flagship phone down the road.

Well today is unfortunately going to feel like déjà vu for many, especially staff at Microsoft Mobile Oy in Finland, as Microsoft has announced that they will be laying off 1,850 employees globally including 1,350 in Finland. These layoffs are apparently part of the final steps in the two year saga of the Microsoft acquisition of Nokia and its utter and complete failure as a business move.

Also included in Microsoft's announcement today is an approximate $950 million dollar impairment and restructuring charge for this move which will include about $200 million dollars in severance payments for laid off employees.

In the long run the purchase of Nokia's phone business, which was initiated and announced during the final months of Steve Ballmer's tenure as Microsoft CEO, never helped Microsoft gain significant market share in the mobile device market and ended up costing the company over $10 billion dollars between the purchase price, impairment and restructuring charges.

In hindsight it is easy to look back now and state categorically that it was a failure on many levels but that does not take away the turmoil that nearly 10,000 employees have had to face as their jobs vaporized in a series of challenging decisions by company leadership.

So does this mean that Microsoft is calling for a complete retreat from the mobile device arena?

As I wrote the other day I don't think that is the case and there are two items related to the announcements today that support that perspective.

First a quote from CEO Satya Nadella about today's news:

“We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same,” said Satya Nadella, chief executive officer of Microsoft. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”

Secondly, there is this internal memo sent out to all Microsoft employees by Windows Chief Terry Myerson yesterday as noted by Recode:

To: Microsoft - All Employees
From: Terry Myerson
Date: Wednesday 5/25, 2AM Pacific Time
Subject: Focusing our phone hardware efforts

Team,

Last week we announced the sale of our feature phone business. Today I want to share that we are taking the additional step of streamlining our smartphone hardware business, and we anticipate this will impact up to 1,850 jobs worldwide, up to 1,350 of which are in Finland. These changes are incredibly difficult because of the impact on good people who have contributed greatly to Microsoft. Speaking on behalf of Satya and the entire Senior Leadership Team, we are committed to help each individual impacted with our support, resources, and respect.

For context, Windows 10 recently crossed 300 million monthly active devices, our Surface and Xbox customer satisfaction is at record levels, and HoloLens enthusiasts are developing incredible new experiences. Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same. Thus, we need to be more focused in our phone hardware efforts.

With this focus, our Windows strategy remains unchanged:

1. Universal apps. We have built an amazing platform, with a rich innovation roadmap ahead. Expanding the devices we reach and the capabilities for developers is our top priority.

2. We always take care of our customers, Windows phones are no exception. We will continue to update and support our current Lumia and OEM partner phones, and develop great new devices.

3. We remain steadfast in our pursuit of innovation across our Windows devices and our services to create new and delightful experiences.Our best work for customers comes from our device, platform, and service combination.

At the same time, our company will be pragmatic and embrace other mobile platforms with our productivity services, device management services, and development tools -- regardless of a person’s phone choice, we want everyone to be able to experience what Microsoft has to offer them.

With that all said… I used the words “be more focused” above. This in fact describes what we are doing (we’re scaling back, but we’re not out!), but at the same time I don’t love it because it lacks the emotional impact of this decision. When I look back on our journey in mobility, we’ve done hard work and had great ideas, but have not always had the alignment needed across the company to make an impact. At the same time, Ars Technica recently published a long story documenting our journey to create the universal platform for our developers. The story shows the real challenges we faced, and the grit required to get it done. The story closes with this:

And as long as it has taken the company, Microsoft has still arguably achieved something that its competitors have not... It took more than two decades to get there, but Microsoft still somehow got there first.

For me, that’s what focus can deliver for us, and now we get to build on that foundation to build amazing products.

Terry

So it is unlikely at this point that Microsoft will ever challenge the mobile market as a major player after the events of the last two years but it certainly appears that they will choose to serve a niche market of fans, enthusiasts and business customers at this point and see where that road might lead.

What are your thoughts on the last two years of the Microsoft/Nokia journey?

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