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Microsoft will keep building Windows Phones but comes at a high cost

Microsoft will keep building Windows Phones but comes at a high cost

Late last month Satya Nadella sent out a new mission and vision for Microsoft to employees worldwide which laid out the focus of the company moving forward and into a new fiscal year.

Following that email the speculation and discussion across social media and tech sites ramped up significantly.

The line in that email to employees that generated all of that discussion was this one (emphasis added):

"We will need to innovate in new areas, execute against our plans, make some tough choices in areas where things are not working and solve hard problems in ways that drive customer value.”

Many believed Windows Phones would be that tough choice. There has not been a true flagship device since the Nokia Lumia 1520 and we all know about the dismal market share numbers here in the US while in other areas of the world the platform enjoys some decent success.

Over the last two weeks we have already heard about the sale of the image acquisition functionality of Bing Maps to Uber and the deal with AOL for them to take over Microsoft's display and video ad business.

Those two moves were minor in the scheme of things when you put them up next to today's announcements from Microsoft concerning the companies Windows Phone business.

In an email to employees today, Satya Nadella has revealed the company will take a $7.6 billion impairment in regards to the Nokia Devices and Services purchase that was initiated by former CEO Steve Ballmer in September 2013 for $7.2 billion. That figure was updated to $9.5(*) billion in April of 2014 when the acquisition was completed under Microsoft's then new CEO Satya Nadella.

In addition to the $7.6 billion there will be an additional restructuring charge between $750 and $850 million. Along with that there will be layoffs globally, mostly in the phone business, of nearly 7,800 employees.

It is hard to read the numbers above and sometimes not see the human impact of decisions like this but Nadella acknowledges that in his email:

"I don’t take changes in plans like these lightly, given that they affect the lives of people who have made an impact at Microsoft. We are deeply committed to helping our team members through these transitions."

Nadella also recommits the company to its continued efforts in building first-party Windows Phone devices but that effort will now be part of the overall Windows ecosystem and not as a stand alone business.

He laid out both a near and long term goal in this area:

"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.

In the longer term, Microsoft devices will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly. Our reinvention will be centered on creating mobility of experiences across the entire device family including phones."

Today's news brings a definite mixed bag of good and bad.  It is never easy to see people lose their jobs but there are times companies must prune and refocus the growth of the overall entity - just like a gardner does with their plants.

(*) - As verified with a Microsoft spokesperson today.

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