Today Microsoft announced some sweeping changes affecting their mobile hardware efforts, including a $7.6 billion dollar write off of the Nokia Devices and Services acquisition, in what CEO Satya Nadella calls a “fundamental restructuring of our phone business”. The moves not only clear the books of billions of dollars, but result in the loss of 7,800 jobs, including 66% of Microsoft’s newly acquired workforce in Finland, essentially “killing off” the town of Salo. Already gone were former Nokia CEO Stephen Elop and Jo Harlow, with the phones business moving into Windows under Terry Myerson, and as Nadella said in an email to the company earlier today, the focus for Windows Phone has changed (emphasis ours):
In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group. 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.
It’s easy to characterize the acquisition of NDS as a mistake, and writing off billions sure points that way. However, there were indications that Nokia was giving up on Windows Phone and moving to Android, and not buying Nokia might well have meant the death of Windows Phone right there. Even with the write off, Microsoft still has a foothold in phone hardware with Windows Phone, some valuable assets gained from Nokia (which don’t go away, even as they’re wiped from the books), a new understanding of how hardware fits into the org structure and the company’s plans, and just perhaps, a way forward.
More importantly, Microsoft has rebuilt its operating systems to align together under one roof and with a common core. Windows 8 was the jarring but necessary wrenching of Microsoft’s operating system from the mouse/keyboard paradigm to one that was touch/tablet friendly. It may have been poorly received, but it had to be done, and it was going to be painful. That step, too, has been taken, and Windows 10 will not only bring back the familiar desktop environment, but be ready for a much more touch friendly and portable experience as we shift from desktop to mobile.
More generally, Satya Nadella needed to cut through a company culture based on us vs them, where “us” wasn’t Microsoft, but this group or that division within the company. His forward focus has shown to be more than just talk, and the old regime is largely gone, and the old barriers to innovation are too. Rather than fight off Apple and Android, Nadella is embracing them. Rather than just trying to shore up Windows and Office, the new CEO is looking forward to new opportunities.
Just as flip-phones are ancient history today, the “phones” we’ll be using in say 5 years won’t be anything like what we’re using now, and Microsoft is racing to position itself to be ready for the next era of digital technology. It missed a whole generation of mobile computing, and today it wrote that generation off. With an operating system built for the future, efforts in areas like Continuum, ubiquituous wifi, compelling platform agnostic services, and cutting edge hardware, Microsoft perhaps for the first time in many many years is looking forward to the next generation, instead of trying to protect the last one.Further reading: Microsoft, Nokia, Windows Phone