Microsoft fires 12,500 ex-Nokia mobile people, ends X Series running Android, and Elop authors another moronic memo

So what else is new? I told you Microsoft can't make the Nokia business work any better than Elop could after he had destroyed it so totally.

First, my deepest sympathies to the 12,500 former Nokia staff who now carry Microsoft business cards, who will be fired. Its nearly half of what was left of 'The Division Formerly Known as Nokia Mobile Phones" after all the layoffs that Elop's mismanagement at Nokia caused in the previous four years. I did warn that the layoffs would not end, when the Microsoft purchase of Nokia was announced and as we've seen, the division has been producing ever more losses and ever shrinking market share. The solution by the new CEO Nadella at Microsoft is predictable as its harsh: more layoffs. I had hoped that Microsoft would have endured these highly skilled specialized labor for longer, letting them try to find some remedy to the handset business or assist other Microsoft hardware (or mobile) evolutions but no. The new CEO has spoken. And as new CEO, now is the right time to make the big cuts. Microsoft has never seen this kind of mass layoffs before, and as the whole corporation, the cuts are about one in ten employees. But they are almost exclusively inside the Nokia handset part. And unfortunately for Microsoft's mobile unit, Elop still gets to keep his job (for now).

But yeah. I told you this Nokia unit will not return to growth or profits when Microsoft takes it over; on the contrary, the decline will continue and the unit will make more losses. And further layoffs are of course inevitable in that situation.

I also said that Microsoft will shut down the Nokia X Android based smartphone handsets business 'immediately' after Microsoft takes over the Nokia handset business. Ok. So I was wrong by two and a half months. So sue me. I call that a pretty darn good prediction.. All those who applauded the bold X Series and Microsoft selling Android based smartphones.. haha, thats what you get. That was yet another boneheaded move by Elop and now the new CEO has clearly overruled the man who would still like to be called 'The General' haha... Indeed 'The General' who is so confused about strategy he invents quotes by Sun Tzu that are opposite to what the Master wrote in his strategy handbook 2,500 years ago...

But yeah. X Series is dead. Microsoft will continue to support and sell the existing Android based X Series for a little while longer but all upcoming X Series smartphones will be migrated to Windows Phone instead. Yes. That is the correct move by Microsoft. Now what in the world was Nokia handsets doing with this mad strategy last year, and wasting enormous resources on a doomed Android project? How many millions went down that drain? How many jobs could have been saved without this idiotic misadventure. And as this was so obvious, why did it take Elop 2 months and 17 days to learn the lesson that if you are 'Microsoft' whose strategy is built upon 'Windows' then you don't want to sell your hardware supporting a RIVAL platform called Android? What is wrong with Elop? (Why is he allowed to remain in charge of the MIcrosoft hardware division?)

What can we read between the lines? In Q1 the Nokia X Series was not sold for the full period but it already took 21% of Nokia's total smartphone business. Now in Q2 we've had the first full quarter of X Sries sales. How much might it have taken? I'd say its safe to say somewhere between 30% and 40%. Could even be half of Nokia's total smartphone business. AND very importantly, X Series is cannibalizing Lumia sales on Windows Phone, so those gains would come at least partly out of Windows Phone sales.

We can be pretty sure Microsoft won't release the actual numbers so we will be left to see what the big 4 analyst houses report, but I am expecting Windows Phone total unit sales to be down from Q1 to Q2 - and that is now more than 95% Nokia Lumia of course as the other Windows Phone partners are only pretending to support the dead platform.

But yeah. I told you that Microsoft cannot allow X Series to continue and thus suggest to Windows ecosystem that Microsoft is intending to shift to Android. This was obvious correct strategy by Microsoft - but typically for Microsoft - even this correct strategic move is done with harmful delay and damage .It should have been OBVIOUS to Elop on Day 1 when he returned to Microsoft, that the end of X Series was his first priority. But we know Elop, he's not exactly the sharpest knife in the strategy department. What this end to X Series does tell us, is that Nadella is paying attention to the hardware and Nokia handset business and he has clearly overruled Elop .Good. Nadella seems like the right man for the job (and can you imagine how miuch Microsoft would be screwed now, if Elop had been allowed to take control of the total company haha)

Talking of Elop. He's issued another memo. This one in typical emperor mode, Elop pushing propaganda talking points and just at the end of the memo reminds the readers that, oh, by the way, half of you will become unemployed... What an asshole. Incidentially, not only my view, this is how The Guardian just reviewed Elop's newest masterpiece in memo-writing. This is what New York magazine thought about the way Elop authors his memos when firing half of his staff.  

Please do remember it was BECAUSE of this Elop's failing strategy, that tens of thousands of colleagues of these last ex-Nokians were already fired in the previous four years. This Elop and his mad self-destructive strategy caused the previous layoffs. And those series of layoffs were always accompanied with promises that there would be no more, that Nokia was now on an even keel and headed in the right direction. Bear that in mind when you read this latest cruel document about why half of the people Elop brought with him, have to be fired only months later. Half fired. And he starts his layoff verbage with 'Hello there'... truly an asshole. Arrogant son of a bitch. But Elop doesn't care, as he already collected his 31 million dollar bonus for wrecking Nokia's handset business and causing 50,000 talented hard-working highly-skilled labor to lose their jobs in four years (including this latest batch).

And yes, to be VERY clear, the smartphone unit was not in any kind of financial trouble before Elop started to destroy it. The Nokia smartphone unit was more than twice the size of its nearest rivals - that is a bigger lead than Samsung has over Apple today or bigger than HP has ever in its existence had in the PC business or bigger than Toyota or GM have EVER had in the car business. And Nokia did this profitably in 2010 (its smartphone unit) and the profits in the smartphone unit were growing and set a Nokia-record by the fourth quarter of 2010, right before Elop decided to wreck that successful and dominting business. Yes, there is a myth that Apple was destroying Nokia when in truth - the gap between Nokia smartphones and the iPhone did not shrink in 2010 - the gap GREW. Nokia grew MORE than Apple in 2010. You are the biggest and you grow more than your rivals, and you set record-profits. This is not a 'failing' strategy, this is a highly successful strategy that ANY CEO would want if you were Boeing or Coca Cola or Apple - to be more than twice as big as your nearest rival and set your company's record in profits and you grow faster than your rivals. That was the smartphone business that Elop destroyed (Nokia's problems in 2009-2010 were in its networkng unit and its delivery schedules ie 'execution' not the strategy itself). So Elop takes a successful winning smartphone unit, destroys it totally, sees tens of thousands fired, promises the rest - dont' worry you are safe - then fires ever more, eventually sells the unit to MIcrosoft, and now fires HALF of those last souls who remained. And now he does not have the decency to write 'I have some grave news' or something like that in his memo.

Are we sure Elop is a Canadian? Canadians are generally some of the kindest most considerate people on the planet. And how can this Elop then author such as cruel letter when firing HALF of his staff?

So the ever-diminishing saga of Nokia the once giant handset brand continues its slow death at Microsoft. I told you this business will never fly at Microsoft. I told you the unit will be shut down, but not until Elop is fired and some other Microsoft exec is given a chance to try to revive it first. So lets see how long Elop stays at the hardware division. I'm expecting him to be removed to some non-job by year-end.

To those ex-Nokians who lost their jobs or will be losing them in the coming weeks and months - my sympathies are with you, but don't despair. The world is going mobile and your skills are incredibly hard to develop and you will be finding worthwhile work in the tech space if you want to - or else, if you wanted to change careers, gosh, almost every other industry is also looking to get into mobile. So this may be the opportunity to shift gears and try something new. To those ex-Nokians still at MIcrosoft - take this as a severe warning. You know perfectly well that Lumia is going nowhere and the cheap phones are not part of Microsoft's stretegic intent. Try to switch to any other job inside Microsoft hat is not involved with handsets. Your current job is also going to be gone. Probably not this year, but in the coming few years, there will be more cuts and then at some moment suddenly, the whole handsets business will be shut down. Try not to be there when that happens...

Comments

[Leslie]

Elop can pursuit the job of General Manager of the Los Angeles Clippers.

[Jouko Ahvenainen]

This is my analysis from February, and it is really now happening: http://www.telecomasia.net/blog/content/wheres-microsoft-mobile-heading. I predicted 50% layoffs and Office and other products must go to iOS and Android too.

It is important to remember mobile strategy as a whole for Microsoft is much more than own hardware and devices, and to be honest, I don't know if mobile devices will stay in it.

[Jouko Ahvenainen]

And here is my updated analysis: http://www.telecomasia.net/blog/content/ms-swings-mobile-strategy-action-layoffs.

[@claes]

"if you wanted to change careers, gosh, almost every other industry is also looking to get into mobile"

So true.

[Aviezer]

I begin to suspect that Elop has some information about Balmer and/or Microsoft that is so bad that neither Balmer nor Microsoft want this information to be disclosed to the public. This is the reason they keep him on the payroll.

[abdul muis]

@Aviezer

I was thinking that Microsoft know some Jorma Olila secret, like a mistress affair that make Elop got the Job at Nokia in the first place.

[klaus knolle]

Good old times 14. Feb 2011

"Any Nokia software engineers need a job? We're hiring: www.google.com/jobs," read the tweet posted by Google EMEA (Europe, the Middle East and Africa) recruiter Aidan Biggins.

[cornelius]

I read somewhere else that the department most affected by the layoffs will be the testing department. I am just curious to see how this will affect the number of bugs and the overall quality of the Nokia phones. I think this end of Nokia X is a blessing in disguise, because a buggy Nokia X phone would have tarnished Android's reputation.

[Joe]

Sounds like Asha and S40 are also being killed (aka put in "maintenance only" mode) according to a Memo by Harlow: http://www.bgr.in/manufacturers/nokia/microsoft-to-abandon-mobile-phones-x-series-android-smartphones-internal-jo-harlow-memo/

Every time it is sad to watch this massive downfall of an empire in such a short time...

[youAPPi]

It's unfortunate. But, as you predicted, not exactly shocking. I'm glad you left it on a positive note, though. Best of luck to all ex-Nokians finding greener pastures.

[AndThisWillBeToo]

I still say Nokia X was done with Microsoft support. It just was Ballmer support, not Nadella. The mere fact that Nokia X2 was launched under Microsoft and that they put them "in maintenance mode" instead of killing them out right (Kin anyone?) tells that it was an experiment tried and abandoned.

[Eurofan]

In the comment section of a Guardian article, someone posted Elop's entire memo. I'm copying it to this forum.

Hello there,

Microsoft’s strategy is focused on productivity and our desire to help people “do more.” As the Microsoft Devices Group, our role is to light up this strategy for people. We are the team creating the hardware that showcases the finest of Microsoft’s digital work and digital life experiences, and we will be the confluence of the best of Microsoft’s applications, operating systems and cloud services.

To align with Microsoft’s strategy, we plan to focus our efforts. Given the wide range of device experiences, we must concentrate on the areas where we can add the most value. The roots of this company and our future are in productivity and helping people get things done. Our fundamental focus – for phones, Surface, for meetings with devices like PPI, Xbox hardware and new areas of innovation -- is to build on that strength. While our direction in the majority of our teams is largely unchanging, we have had an opportunity to plan carefully about the alignment of phones within Microsoft as the transferring Nokia team continues with its integration process.

It is particularly important to recognize that the role of phones within Microsoft is different than it was within Nokia. Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft’s digital work and digital life experiences, while accruing value to Microsoft’s overall strategy. Our device strategy must reflect Microsoft’s strategy and must be accomplished within an appropriate financial envelope. Therefore, we plan to make some changes.

We will be particularly focused on making the market for Windows Phone. In the near term, we plan to drive Windows Phone volume by targeting the more affordable smartphone segments, which are the fastest growing segments of the market, with Lumia. In addition to the portfolio already planned, we plan to deliver additional lower-cost Lumia devices by shifting select future Nokia X designs and products to Windows Phone devices. We expect to make this shift immediately while continuing to sell and support existing Nokia X products.

To win in the higher price segments, we will focus on delivering great breakthrough products in alignment with major milestones ahead from both the Windows team and the Applications and Services Group. We will ensure that the very best experiences and scenarios from across the company will be showcased on our products. We plan to take advantage of innovation from the Windows team, like Universal Windows Apps, to continue to enrich the Windows application ecosystem. And in the very lowest price ranges, we plan to run our first phones business for maximum efficiency with a smaller team.

We expect these changes to have an impact to our team structure. With our focus, we plan to consolidate the former Smart Devices and Mobile Phones business units into one phone business unit that is responsible for all of our phone efforts. Under the plan, the phone business unit will be led by Jo Harlow with key members from both the Smart Devices and Mobile Phones teams in the management team. This team will be responsible for the success of our Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the first phone business.

As part of the effort, we plan to select the appropriate business model approach for our sales markets while continuing to offer our products in all markets with a strong focus on maintaining business continuity. We will determine each market approach based on local market dynamics, our ability to profitably deliver local variants, current Lumia momentum and the strategic importance of the market to Microsoft. This will all be balanced with our overall capability to invest.

Our phone engineering efforts are expected to be concentrated in Salo, Finland (for future, high-end Lumia products) and Tampere, Finland (for more affordable devices). We plan to develop the supporting technologies in both locations. We plan to ramp down engineering work in Oulu. While we plan to reduce the engineering in Beijing and San Diego, both sites will continue to have supporting roles, including affordable devices in Beijing and supporting specific US requirements in San Diego. Espoo and Lund are planned to continue to be focused on application software development.

We plan to right-size our manufacturing operations to align to the new strategy and take advantage of integration opportunities. We expect to focus phone production mainly in Hanoi, with some production to continue in Beijing and Dongguan. We plan to shift other Microsoft manufacturing and repair operations to Manaus and Reynosa respectively, and start a phased exit from Komaron, Hungary.

In short, we will focus on driving Lumia volume in the areas where we are already successful today in order to make the market for Windows Phone. With more speed, we will build on our success in the affordable smartphone space with new products offering more differentiation. We’ll focus on acquiring new customers in the markets where Microsoft’s services and products are most concentrated. And, we’ll continue building momentum around applications.

We plan that this would result in an estimated reduction of 12,500 factory direct and professional employees over the next year. These decisions are difficult for the team, and we plan to support departing team members’ with severance benefits.

More broadly across the Devices team, we will continue our efforts to bring iconic tablets to market in ways that complement our OEM partners, power the next generation of meetings & collaboration devices and thoughtfully expand Windows with new interaction models. With a set of changes already implemented earlier this year in these teams, this means there will be limited change for the Surface, Xbox hardware, PPI/meetings or next generation teams.

We recognize these planned changes are broad and have very difficult implications for many of our team members. We will work to provide as much clarity and information as possible. Today and over the coming weeks leaders across the organization will hold town halls, host information sharing sessions and provide more details on the intranet.

The team transferring from Nokia and the teams that have been part of Microsoft have each experienced a number of remarkable changes these last few years. We operate in a competitive industry that moves rapidly, and change is necessary. As difficult as some of our changes are today, this direction deliberately aligns our work with the cross company efforts that Satya has described in his recent emails. Collectively, the clarity, focus and alignment across the company, and the opportunity to deliver the results of that work into the hands of people, will allow us to increase our success in the future.

Regards,

Stephen

[Henry]

Hi Tomi,
I'm a former Nokia engineer, worked actively in the design of last Symbian products (N8 engine and the never born dual-core), and I was caught in the first wave of lay-offs decided in 2010 by Mr Elop (and who was behind him). I think you have written very noble words to all former and actual Nokia employees. Unfortunately the reality for thousands and thousands of people has not been so rosy. I know personally many former colleagues that have struggled to find another job, have changed but had to change again, or had to relocate with or without family in any angle of the world, accept lower salaries and harsher conditions to carry on, others are even still unemployed..it's true, as you say, that many Nokia engineers were skilled and in demand, but it's also true that many of us had to fight hard to find a job looking in different sectors, competing in a job market very demanding and (I could say) also cynical. This has created and will continue to create a situation of professional and personal instability and stress in the life of thousands of individuals and families. What is constantly upsetting me is that all this seems at the end to have been caused by a lack of ethics and professionalism and by the feeble reaction of governments and institutions against it. Design and purposes were clear from the beginning..I hope only that the disaster happened to Nokia will serve in the future to avoid another Nokias.

[Tomi T Ahonen]

Hi all

Jouko Ahvenainen's first article from early February in TelecomAsia was exceptionally sharp - even for Jouko's always-sharp analysis and insights (he's one of my oldest friends in telecoms, we used to work at neighboring desks early in my Nokia career haha). I just tweeted the link to it to my followers. Brilliant call Jouko on the 50% layoffs and like you said, the range is bigger and we both know, this is not the last round of layoffs at the Microsoft-Nokia unit...

The new article is also insightful, thanks Jouko for the link, I hadn't noticed it yet. It is an excellent read and I urge all of my readers here to go read that too. As you'll notice Jouko says the three ways forward for Microsoft's handset business is either grow it's market share, or shut it down, or sell it. I agree totally. And I would add, we know from the Nokia Lumia and Windows Phone history that growing market share will never happen. So while that is of course the goal of Nadella at Microsoft - he'll replace Elop before they admit this was a lost cause so another VP will get a chance to try that futile mission in the future - the real end result is either the unit will be shut down or sold. I hope sold as the talent left in those demoralized 12,500 ex-Nokians left at Microsoft, is so deep and useful, they deserve to get a job somewhere else, where their efforts are appreciated.

Thanks Jouko. I always love reading what you write (or hearing what you say when you speak)

(PS Jouko wrote the foreword to the second printing of my third book, 3G Marketing. He now runs his VC company and is involved in all sorts of cool bleeding edge tech stuff)

Tomi Ahonen :-)

[krishna]

There has to be something, why Mr. Elop who reduced the Nokia from 60,000 employees to about 12000 now is allowed to continue. He knows more than what meets the eye.

[AtTheBottomOfTheHilton]

I have an idea that will be a nail in the eye for Microsoft. I think that the EU should do a GM (General Motors). Basically a state funded project that will resurrect Symbian (which is possible from the open sourced version).

EU legislators owe ex-Nokia engineers this as they allowed the Nokia buy-up to happen.

[MH]

I guess now it seems pretty clear (to me, at least!) that the main function of Nokia X was to scare Microsoft into buying the handset business - showed that Microsoft needed Nokia much more that Nokia needed Microsoft.

[cornelius]

@MH
If your theory is true then why did they wait two months to kill Nokia X? They should've killed it on the spot, unless
1. Microsoft supported Nokia X for a while
or
2. Microsoft's decision chain is so slow that a proposal needs two months in order to be approved.

I, personally, think Microsoft is just confused which is the normal state of affairs at Microsoft.

[Èarendil Star]

Let's be clear: since 2010 nothing has moved at Nokia that MS did not want.
So, it does not make sense to say that the Nokia X was made to "scare MS into buying Nokia".
Nokia X was there as an attempt to entice emerging market buyers into the MS ecosystem. An attempt jointly decided by Ballmer and Elop.
What is happening now, is that Nadella is starting to tackle mobile, and it is possible that Nokia X's results were much better than expected, but with no benefit for the MS ecosystem. Therfore the decision to end the trial.

What now becomes interesting is what becomes of Flop... in this new Nadella era...

[foo]

According to the leaked memo:

"all our devices are intended to embody the finest of Microsoft’s digital work and digital life experiences, while accruing value to Microsoft’s overall strategy. Our device strategy must reflect Microsoft’s strategy and must be accomplished within an appropriate financial envelope. Therefore, we plan to make some changes."

Well, that seems to describe perfectly what Elop did to Nokia years before the acquisition: subjecting Nokia to Microsoft's strategy.

The short-lived Android adventure was the way Elop found to force Microsoft to acquire Nokia. Basically, he adopted the "plan B" that he refused to adopt before.