Jul 10, 2015

    Microsoft's mobile efforts may hinge on Windows 10


    MICROSOFT'S future in mobile devices likely hinges on the software-maker's ability to convince developers to create apps for the phone version of Windows 10, after its ill-fated Nokia acquisition helped trigger 7,800 layoffs.

    The announcement on job cuts is an acknowledgement that its 2013 US$7.2-billion (S$9.7-billion) purchase of Nokia is not going to help paltry sales of its Windows Phone, and that it needs a new approach.

    Microsoft said it will also write down about US$7.6 billion related to its Nokia business.

    The cuts indicate that Microsoft will likely focus its mobile efforts on its high-stakes Windows 10 software release, due later this month, rather than on developing smartphones, analysts said. The software's apps are supposed to work across desktops, tablets and phones with little tweaking.

    The company is betting that the popularity of Windows on desktop PCs will lead to more apps for the mobile version of Windows and entice more consumers to buy its phones.

    "This mobile strategy going forward is the best they could possibly do," said Forrester analyst J. P. Gownder.

    Wednesday's announcement is the second round of job cuts since Satya Nadella became chief executive in February last year. Microsoft said last July that it would slash up to 18,000 jobs.

    The company said in a statement that it will "restructure the company's phone hardware business to better focus and align resources". The cuts will also require Microsoft to take a restructuring charge of between US$750 million and US$850 million, the statement said.

    Last month, the company struck deals to hand over much of its advertising business to AOL and sell mapping assets to Uber.

    Narrowing its focus in mobile will allow Microsoft to devote resources to the areas where it is strongest, such as software and cloud development, said Ben Bajarin, an analyst at research firm Creative Strategies, noting that its mobile phones served customers "from the low end to the premium tier".

    Microsoft has struggled to break into the mobile market, which is dominated by Apple and Google's Android. Its Nokia acquisition was an attempt to control both phone software and hardware, as Apple does.

    Some analysts say the job cuts may mean the beginning of Microsoft's exit from mobile. Yet, because consumers have shifted more of their time to mobile, it is imperative for Microsoft to remain in the market through a successful Windows 10 launch, said FBR Capital Markets analyst Daniel Ives.

    "They're going to continue to be a tertiary player in mobile unless something dramatically changes," he said. "Nokia was that Hail Mary acquisition that was clearly a failure."