According to some analysts, job cuts may mark the beginning of Microsoft smartphones exit from mobile business.
The company will no longer try to build a standalone phone business, but instead plans to build a Windows ecosystem that includes its own devices, CEO Satya Nadella told staff in an email announcing the changes.
The announcement comes almost one year after Microsoft cut 18,000 jobs following the acquisition of Nokia Devices and Services. Nadella a year ago announced layoffs that would affect about 12,500 employees who came to Microsft from Nokia (along with 5,500 other Microsoft employees), and the company had since shuttered phone factories from China to Hungary.
AOL previously used Google to power its search engine.
The Redmond-company will focus on creating a Windows ecosystem where all of its devices and third-party devices can interact seamlessly. An earlier layoff of around 18,000 employees was also mostly aimed at the phone business. The cuts will also require Microsoft to take a restructuring charge of between US$750 million and US$850 million, the statement said. It also means that Microsoft is now taking on BlackBerry in a head-to-head battle. Microsoft bought aQuantive for $6.3 billion in a bid to increase its role in the online ad sector that was dominated by the likes of Google and Yahoo.
Microsoft on Wednesday announced that to cut 7,800 jobs along with a reorganization of its Windows Phone unit which has struggled in the mobile market.
Going forward, we will focus on building the very best Windows phones on a quicker timeline.
The cuts indicate that Microsoft will likely focus its mobile efforts on its high-stakes Windows 10 software release, due in late July, rather than on developing smartphones, analysts said. Its Nokia acquisition was an attempt to control both phone software and hardware as Apple does.
Microsoft still remains a significant software maker, with some version of windows running on more than 90% of the world’s computers.
Cross Research analyst Shannon Cross said she expects more cost cutting in the next couple of years as Microsoft needs to become more competitive in the smartphone market.
Last month we pointed out that Stephen Elop, the ex- top boss at Nokia was leaving Microsoft for a second time.