Microsoft’s Mobile Future Unclear After Cutting 7,800 Jobs
Microsoft’s Windows Phone service had appeared to be gaining an audience, slowly making a place for itself in a market dominated by the Apple and Android operating systems. This makes Microsoft’s announcement that it will cut 7,800 jobs even more surprising, just a year after purchasing Nokia’s phone service in 2014 for £4.7 billion. While Microsoft’s future involvement with mobile phones remains to be seen, current prospects do not seem promising.
Microsoft Taking a £5 Billion Loss on Nokia
The previous CEO of Microsoft, Steve Ballmer, acquired Nokia last year. Now under the direction of Satya Nadella, Microsoft is going to write down the cost of the Nokia acquisition, along with a restructuring charge of over £1 billion. This is part of the overarching restructuring that was announced last year, with a total estimate of 18,000 jobs to be lost.
Overall, the Windows Phone has dropped to only three per cent of the mobile marketplace, despite the uptick of sales of Nokia Lumia phones. These lower end models provided a small boost in overall sales, but their small margin of overhead still left Microsoft lagging behind. Effectively, Steve Ballamer’s proposed vision of staking a claim in the marketplace has floundered, leaving Satya Nadella to pick up the pieces.
Microsoft Changing Its Focus
With the recent release of the Windows 10 operating system, Microsoft has taken a step back from exclusively catering to mobile devices. Windows 8 was their first true foray into the mobile world, with mixed reviews from both computer and mobile users. Microsoft has heard their concerns, and is returning its focus to personal computers, with an operating system that is adapting to their customers’ needs.
Satya Nadella’s statements regarding the Nokia write down seem to confirm this shift in direction. He sees Microsoft shying away from the standalone phone business. Instead, it will head towards a multifaceted Windows ecosystem. This likely means that it will concentrate on the areas it already does well, and work towards integrating a wide array electronic devices under its umbrella. This moves Microsoft toward the ultimate goal of many technology companies, of ultimate connectivity with the Internet of Things (IoT).
Poor Market Share Prompted the Change
Microsoft has done little since its purchase of the Nokia Lumia division to improve upon existing competitor’s mobile devices. It did not even have a chance to create stand out models that outshone the previous Lumia mobile phones. The purchase may have been too little, too late, prompting the company to cut their losses before the situation became dire.
Even in the UK, where the Windows Phone had held a comparatively strong portion of the market, sales quickly fell in 2014. Windows Phone only held 7.4 per cent of the market share by the end of 2014, down from 11.3 per cent at the same time in 2013. In the U.S., market share was even more dismal, at a lowly 3.8 per cent at the beginning of 2015.
Mobile Apps May Bring Microsoft to the Forefront
While mobile phone sales have dropped, Microsoft has been developing new ways to gain a foothold in the mobile market. Mobile apps appear to be the immediate solution, as its Office programs are now available as mobile apps, along with Office 365. Available on Android and iOS mobile phones, these apps can keep Microsoft in the game and bolster their lacklustre mobile performance.
Microsoft has over ten mobile apps on the Android platform, including Xbox Smartglass. However, on iOS, Microsoft has nearly 60 apps in the Apple Store, including a variety of games. Mobile users love trying out new apps, and the low purchase prices can keep Microsoft afloat while it figures out what to do next.
Although the news of dropping Nokia is unsettling, Microsoft is not giving up on the mobile market. A new direction, combined with multiple income streams, could be the change that Microsoft needs. Let the big names maintain their status as capable phone developers, and Microsoft will continue to develop the programs that users love.