Microsoft CEO Satya Nadella has announced that 7,800 jobs are being cut, primarily in the phones division. This suggests that the company is essentially giving up on trying to compete with iPhone and Android.
Writing in an email to the company, Nadella explained the future of Microsoft's phone business:
"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. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.
"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."
Reading through the corporate euphemisms, what this means is that the company will still be making phones. But it will be aiming them at specific niche markets, such as business users, and it will be doing it with fewer people.
Ultimately, this means that it will no longer be actively competing for general users. This follows a trajectory that over the last couple of years has seen Microsoft begin to pro-actively develop apps and services for rival platforms. Microsoft has long had a tiny market share, in a product category long dominated by iOS and Android.
As TechCrunch notes, Nadella also announced a write-down of $7.6bn, which is basically changing the declared value of an asset. In this case, it means that it is saying the acquisition of Nokia's phone division was essentially worthless.