Destroyed Microsoft Nokia

Microsoft: The Nokia Destruction Final Act

It seems almost unimaginable: just a few years ago, Nokia was the largest mobile phone manufacturer in the world. There is practically nothing left of that: On Wednesday, Microsoft boss Satya Nadella announced that 7,800 employees are to be dismissed - the vast majority of them in the Windows Phone hardware department, which arose directly from the takeover of other parts of the traditional Finnish company.

prehistory

With this, Nadella puts an end to a story that began in 2010. At that time, Nokia had pulled the emergency brake after years of serious strategic mistakes and a general ignorance of market developments. With Stephen Elop, a new CEO was hired to make the company fit for the future. And he decided very quickly to completely turn Nokia inside out.

Change

Instead of in-house developments such as Meego and Symbian - or Google's Android - Microsoft was supposed to save the company with its Windows Phone. Whether the fact that Elop was previously employed by Microsoft for years played a certain role in his decision is still a popular topic for lively speculation - but it doesn't change the story anyway.

Consequences

What followed was a series of devices that all had one thing in common: They were nowhere near as good as Nokia needed to be. At the same time, the close partnership between Nokia and Microsoft meant that practically all other hardware manufacturers withdrew from the Windows Phone world.

hug

So the dependency between the two companies became even greater, and when it became clear that Nokia could not go on like this for much longer, then Microsoft CEO Steve Ballmer made a decision that was already highly controversial within the Windows manufacturer - and that Companies are now costing dearly.

Billions burned

The acquisition of Nokia's wireless division will go down in history as one of the most costly legacies a CEO has ever left behind. Microsoft will have to write off 7.6 billion US dollars for the settlement of the Nokia remnants - and thus even more than the 7.2 billion that the takeover, which was only completed last year, cost. In addition, according to the company, there are still 750 - 850 million in restructuring costs due to the current wave of layoffs.

Disagreement

The reason why things went so quickly now lies in the fundamental differences of opinion between Ballmer and Nadella. While the former would have liked to position Microsoft as a hardware manufacturer, Nadella sees no future in this and is orienting his company entirely towards the cloud and "Mobile First" - and that includes offensive support for the competition's software platforms. The fact that Nadella was against the takeover of Nokia is not a big secret either.

restructuring

The mass layoffs also mean that Microsoft has to fundamentally reorganize its mobile business - or, as Nadella puts it with the appropriate business euphemism: "focus". Microsoft will continue to offer smartphones for the time being, but the company wants to focus on three areas: the low-end market - where certain successes have been celebrated in recent years -, the business segment and flagship devices.

Outsourcing?

Given the current announcements, it seems unlikely that Microsoft will continue to manufacture these devices in-house. Compared to "ZDNet" one did not want to comment on corresponding inquiries in any case. Some of Microsoft's smartphones are already being produced by other manufacturers.

Nexus echoes

How this strategy will actually look in implementation will only have to be seen in the coming months. However, it sounds similar to what Google is doing with its Nexus / Android One series, i.e. flagship devices whose main purpose is to set the direction for your own smartphone ecosystem and to open up new markets.

Challenges

Of course there is a crucial difference here, as "The Verge" points out: Numerous other manufacturers are active around Android, the market for mobile Windows has so far been practically single-handedly contested by Microsoft. So it will be essential for Microsoft in the coming months to forge new partnerships; if this does not succeed, you will probably have to subject your own mobile strategy to a further test. (Andreas Proschofsky, July 9, 2015)