Where will the new Microsoft put its focus? Expected job cuts will provide clues

Where will the new Microsoft put its focus? Expected job cuts will provide clues

Summary: Microsoft is believed to be ready to cut thousands of jobs this week as part of management's attempt to focus on areas where the company can win. Which teams are likely to take the brunt?

SHARE:

Microsoft is expected to cut thousands of jobs, most likely this week, just ahead of its Q4 fiscal 2014 earnings report next week.

Expectations are the Nokia handset division, which Microsoft officially acquired earlier this year, will bear the brunt of the cuts. (Microsoft acquired 25,000 Nokia employees as part of that transaction, adding to its workforce of close to 100,000.) Beyond those possible cuts, Microsoft also may cut more jobs in marketing across the company, Bloomberg reported on July 14, as it did in 2009 when it shed more than 5,000 employees.

Microsoft CEO Satya Nadella is working to focus the company on fewer, key areas where it has a better chance of winning. The areas where Microsoft is trumpeting its wins at this week's Worldwide Partner Conference are largely in the cloud -- with Azure, Office 365, Dynamics CRM Online -- and Office, Windows Server and business intelligence/SQL Server on premises.

The areas where Microsoft is struggling right now -- in terms of market share, positioning or both -- are in Windows on non-PC form factors (in other words, Windows 8, not Windows 7), Windows Phone (both hardware and software), Surface tablets and Xbox consoles.

Some on Wall Street, such as its newest board member, ValueAct's Mason Morfit, are believed to be in favor of Microsoft sticking to its enterprise software and services knitting. Things like tablets and gaming consoles don't have the meaty margins that software and cloud services do, they argue.

nadellalayoffs

But Microsoft officials continue to publicly espouse the belief that Microsoft needs to be a player in both consumer and enterprise because -- as Chief Operating Officer Kevin Turner told Microsoft's resellers this week at the partner show -- customers are "dual users" with intertwined home and business lives.

Microsoft is in the midst of attempting to pivot and remake itself as a "productivity and platforms" company, rather than a devices and services company. That change is more than semantic. In the post-Ballmer Microsoft, hardware is interesting only insofar as it "lights up" productivity software and services.

Does that mean Microsoft will or should offload its hardware-focused businesses and leave the building of gadgets and appliances up to its OEM partners? I think many on Wall Street would say yes, but Microsoft management still seems to be saying, at least for now, no.

So if you're Microsoft management, where do you make cuts if you're trying to pare Microsoft down to core businesses where it has the best chance of winning?

Do you continue along the low-cost, high-volume path, which has been where Microsoft traditionally has focused? In the case of Windows Phone, that might make sense, given the bulk of Microsoft's success with that platform has been with cheaper smartphones, not higher-end flagship Lumia phones. If that's your plan, things like an Android phone running Microsoft software and services make more sense.

Or do you shift gears and focus on offering premium software, services and hardware like Surface tablets and Perceptive Pixel large-screen touch displays? Leave the race to the bottom to Android vendors and focus on finding ways to upsell users on more premium hardware, software and services?

I don't know which way Microsoft will go. I'm thinking the expected layoffs -- based on what the company has done in the past when it has cut jobs -- won't result in many entire product lines or divisions being axed. (And at least some of those cut are likely to end up in new roles at Microsoft if the past is any indication.) But the cuts should provide more of an indication of where this "productivity and platforms" company will focus in 2015 and beyond.

Topics: Mobility, Cloud, Microsoft, Nokia, Smartphones, Tablets, Leadership, Windows Phone

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

128 comments
Log in or register to join the discussion
  • If MS is serious about hardware

    then don't touch the Nokia division. Killing the Zune division made much more sense since that HW was Ok but not great compared with what Nokia can produce.

    My 2 cents.
    Sean Foley
    • If MS is serious about hardware

      MS should avoid hardware markets, i.e. they are NOT serious about hardware.
      manorchurch
      • They have to be serious, in order to push the software.

        They need the hardware to build the eco system. Face it Microsoft needs to be both in the phone and tablets and they can't do it by simply selling an OS. They must create synergy between all the differing HW platforms particularly for developers. That said they only need really good reference designs and then allow other companies to build even better hardware. Once the ecosystem is established then they can back out.
        MeMyselfAndI_z
    • Um...

      Why should Microsoft be serious about hardware. They are a software and services company. They should be serious about getting their software and services on all platforms. This diversion into consumer hardware (outside of Xbox) to try and be like Apple is silly. Spin off Xbox, Surface and Windows Phone into a separate company.
      Rogifan
      • Not business smart

        I agree with Nadella. People have dual lives as business users and consumers. Brand recognition is one reason to keep both. But even more important is that Microsoft's business and consumer side of the business are symbiotic. In the end it's about people and MS's overall business benefits from what it learns from both sides. Those who want to get rid of the consumer side of MS's business isn't thinking about the overall success of the company.
        Those who hunt Trolls
        • Those who hunt Trolls: "the consumer side of MS's business"

          Implying that Microsoft's fledgling hardware business is consumer-focused is inaccurate. The Surface Pro 3 plays more to business than to consumers. In addition, Windows Phone 8, especially with the free enterprise pack, and the Surface 2 play equally to business as they do to consumers, BYOD or not.

          As to whether devices 'works' for Microsoft, I have my doubts. A spin-off of Microsoft hardware into either an independent subsidiary or via a sale to a hardware company (just not HP, please) makes great sense to me as Microsoft is a software company at its core.
          Rabid Howler Monkey
          • RE: Monkey

            I've never stated that it's consumer focused. As I've stated above, Microsoft has interests with both the enterprise and consumer sides of their business. Their overall business benefits from what they learn from both. How you've interpreted that as being consumer-centric is beyond me.
            Those who hunt Trolls
        • Microsoft control and restrictions of WP

          Windows Phone was first introduced to the public at MWC back in February 2010. At this point Microsoft saw how Apple was doing in iPhone sales and wanted to mimic their iPhone philosophy and saw how well it worked for them. Meanwhile they just killed off their Windows Mobile and store in the process. When they reinvented Windows Phone. They also severely restricted the WP platform for developers as well. Developers can't change the UI or other system extensions or input / output. You can't add your own keyboards or other input methods. No one except Microsoft can add or change anything on WP OS. Now look at Android where OEMs can add, or modify any part of Android to enhance the OS. For that matter OEMs are not restricted to any specific hardware or CPU's. Unlike WP is restricted to using a specific set of Qualcomm CPUs only. WP has been free since last year for OEMs to make WP devices. So why hasn't it taken off. Could it be the lack of apps and services? Could it be that OEMs would be competing in with Nokia's WP devices, which maintain over 90% of the WP market. So OEMs would be using Microsoft's WP OS and competing with Microsoft's Nokia WP devices. Or they could compete in the Android market that has around 80% of the global market share vs Microsoft's less then 4% of the global market share. No wonder why there have been so many rumors of Microsoft paying OEMs to make WP devices.
          Look Google sold Motorola off to Lenovo and Google didn't have to sell it off. But in order to appease all the Android OEMs, then Google needed to sell off their hardware division and not compete with their current OEMs. Microsoft has to do the same if they are serious about growth in their software and services. Or they can continue the down the route they have taken and be like Apple.
          sgodsell
          • The middle ground

            windows phone is middle ground between complete openness of android and the walled garden. OEM needs rules otherwise we have windows mobile all over again. Also it hasn't been a year they announced windows phone free for OEM, at the beginning of the year.
            Meansman
    • They can't do both being successfully in their position.

      Google can get away with competing with their hardware OEMs because of their strong position in the market. Being at a distance third, Microsoft can not.
      dave95.
      • Motorola Mobility is almost in the hands of Lenovo

        One has to conclude that Google viewed Motorola Mobility as either a distraction and/or as a liability with its OHA OEMs.
        Rabid Howler Monkey
    • I Believe That Malcolm X Referred To This As...

      "The Chickens Coming Home To Roost".

      MS has been using creative accounting for so long to hide losses, that it's only a matter of time before you can't write those 100,000 bi-weekly paychecks anymore!

      MS Billion Dollar Losers Club:

      * XBox
      * Bing
      * Surface
      * Windows Phone
      * Windows 8.x
      * Windows RT
      * Steve Ballmer (couldn't resist)

      These divisions need to be shuttered immediately or the entire dinosaur (and MS is a dinosaur), will become extinct.
      orandy
      • That is a horrible idea.

        Doing something that would destroy the company and force them into failure.

        How could anyone think of something so incredibly stupid?

        Of course, knowing you, you just want Microsoft to fail, am I correct?
        ForeverCookie
        • Have you read his posts?

          He had to flunk out of school to even have half a brain of those ideas.
          ScanBack
      • Nice to have an opinion not based in facts

        First of all, the Windows Phone/Windows RT division is finally coming together and can get rid of some operational redundancies. Mobile is where Nadella wants to go along with the services needed to power mobile. MS had to take over one of the largest manufacturers just to gain some ground (which it is doing). It is those that are nearsighted and actually pay attention to propaganda that believe that MS doesn't have a chance in mobile. They may have been late, but they got it right. Apple is spending heaps of money on advertising and have the largest incentives in the carriers right now to push the phones with Android manufacturers a close second. I think the best move is to get rid of the marketing department who seems to only know how to sell Microsoft products to Microsoft customers. They need to market to the masses. I see surface ads more than I see Windows Phone ads and this should be the other way around. If someone has the phone, they are going to want the bigger cousin, not the other way around.

        The console market has such a slim profit margin that no matter what company you go with, they are going to lose out on their hardware division. Same for phones. It is the services and products division that profits off of the hardware. Your idea of shuttering the hardware divisions makes no business sense whatsoever. I just see poor management that spends more money and resources on R&D than advertising and is suffering for it. The people selling substandard devices, are way behind on technology, and getting people to buy them hook, line and sinker are doing so because of successful marketing only.
        tjmullen2
      • Really - did you go to school or are you just pulling

        stuff out of your rump to see if smells OK. Sheesh, your mother made you breakfast time to come up from your the basement bedroom, for your job at McD's.
        ScanBack
  • Probably laying off the entire Windows 8 team

    If they produce the same garbage in Windows 9 as they did in Windows 8 there will be even more layoffs coming. I DO NOT want a flat gay 4-bit color scheme on my desktop. End of discussion. Bring back the 3-d transparency, full 32-bit glorious color or its another(yes I said another as I did not purchase Windows 8) pass for me on Windows 9.
    Another FAILURE are live tiles. You want people to be productive but you want them to see 47 updates every second, possibily inducing epileptic seizures in some folks? But you want them to focus on a single application once it's launched? Make up your mind. Live tiles need to be gutted...end of story.
    Sorry, patching on a start menu with gay live tiles isn't gonna make me fall head over heels for Windows 9 either. I hope Microsoft isn't that far out of touch with reality.
    If they don't get Windows 9 right they are doomed.

    If all these demands are not met, you can classify Windows 9 as DOA.
    j4w4
    • MS is DOA anyway unless...

      Unless they can stay ahead of Android. Likelihood of that: Zero.
      manorchurch
      • You and ORandy need to hang out

        you obviously have no clue on business models, you would realize how stupid that comment was.
        ScanBack
    • That would be dumb

      I'm not arguing they did a great job on the UI, but Windows makes them billions and billions of dollars, and runs on everything from servers to netbooks. That would be like shooting themselves in the heart in order to give the brain a bigger priority... one don't work without the other.
      Mac_PC_FenceSitter