I’m sure you’ve heard: Microsoft is laying off approximately 7,800 employees, mostly in the handset division, which is primarily comprised of former Nokia employees.
Certainly a sad day for many good men and women from Nokia. I hope they take some comfort in knowing they’ve made a lot people’s lives better.
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.
Not sure why Nadella didn’t include more detail. Perhaps, at this moment, it would be a distraction from communicating the main decision. But then, again, the detail would have helped to convey the decision with far greater clarity.
In terms of the likely path forward with smartphones, here’s my initial take:
- “Business customers” = One or two Surface smartphone models, intended for enterprise users.
- Also intended to set a high bar in terms of mainstream specs and quality, but without the broad distribution and marketing that would threaten OEMs. Basically, it’s there if a consumer wants it, and if OEMs make crappy products. But if an OEM has a better product, sharper marketing, or wider distribution, they won’t lose consumer business to Microsoft.
- Microsoft might be thinking that business customers will demand less hardware and software innovation, easing the pressure on Microsoft to out-do Apple. It sounds like, for now, Microsoft will be happy with Surface-like results (low unit sales, at a decent profit on a product basis).
- “Value phone buyers” = Low-priced Lumia smartphones.
- “Windows fans” = Choose your brand: Lenovo, other OEMs.
- More likely to carry leading-edge components: “riskier” cameras, displays, sensors, materials, batteries, sizes, and forms than a Surface model.
- More likely to carry lower prices than what Microsoft will offer with Surface. Reminds me of Xiaomi’s recent experiment with Microsoft. Basically — Xiaomi or not — imagine Xiaomi-like or Oppo-like quality (I’m not saying it’s great), but with Windows, at a competitive price.
Microsoft’s calculation is that it can rely on the Surface team and remaining handset employees to satisfy the first two sets of users. And rely on OEMs to attract anybody else, via: no license fee for Windows; no competition from Microsoft; “inspiration” on reference designs / capabilities from the Surface models.
Will it work? While I support the idea of a third major mobile OS, at this point it’s difficult to anticipate more than – to use the phrase I used above – “Surface-like results”.