Last Lifeline from Microsoft to Soon-to-End Lumia Handset Unit - 7,800 more jobs lost and $7.6B written off the books

So that next firing cycle came today at Microsoft. Lumia is dead, has been dead for years. Nadella knows this. He fired Elop earlier and I told you then, that now its on borrowed time and more layoffs were coming and the new VP will get some time for one last attempt to revive this unit.

So today Microsoft announced 7,800 jobs lost mostly from the ex-Nokia handset business. They also write off $7,6 Billion of their Nokia purchase, nearly all of it in fact. Furthermore, they announce that their previous expectations for the handset business are no longer viable, in other words, that the handset business will continue to struggle and now the expectations of returning to profit next year, is unlikely. And they say they are going to have a more 'effective and focused' in their phone portfolio which is lawyer-speak for 'we will offer less variety in phones'. Will that help sell more, of course not. Nadella just wants the bleeding to stop and this is his way, lets cut off nearly half of the remaining staff, and reduce the phone offering, so the damage of the loss-makng unit will be less severe in coming months, before this unit is shut down.

So, first, my condolences to all ex Nokia staff who will lose jobs from these cuts. And my warning once AGAIN that this is not the end, there will be more cuts to come. And that this unit is already dead, it will be shut down or shifted to Surface or other business at Microsoft. The handset dream at Microsoft is still dead. It cannot be revived. It died in 2011 as first reported on this blog. The root cause for the reason why Windows Phone/Windows 10 can never succeed as a smartphone OS has nothing to do with the iPhone or Android, nothing to dio with apps, nothing to do with phones (the phones are pretty good). It is all dependent on the carriers/operators and the distribution channel which said in 2011 that because Microsoft bought Skype, and Skype is the only existential threat to the mobile telecoms business, the operators will not subsidise their own death..This is what then-Nokia CEO said to Nokia sharehiolders and Nadella knows this is what he hears from all his negotiations with major carriers/operators. The same thing Steve Ballmer heard when he was Microsoft CEO and tried this gambit. The operators do want a third ecosystem but they will never accept Windows Phone (Windows 10). Not because it happens to have (or not have) Skype. Its because MICROSOFT owns Skype. Owns the poison that would kill the telecoms operator business. That is why Windows and Lumia will never succeed in smartphones.

I told you first here on this blog in 2011 when Microsoft bought Skype and Elop told you when he spoke to the Nokia shareholders and it is 100% true. The boycott against Windows smartphones started BEFORE there was any Lumia handsets. It started BEFORE there were Skype apps for Windows Phone. And while Android and iPhone have Skype, its not aimed at phone makers who have Skype. Its aimed at MICROSOFT because MS OWNS Skype. Very clear. And all the handset makers who exiteed Windows Phone have said so in more or less clear terms, as have departed Microsoft Windows Phone execs too.

So now we see the final stage of this sad play. Nadella will give one last chance for someone other than Elop to try, with only a very reduced portoflio of handsets and with far less staff, to try the miracle of turning this business around. And they warn publically not to expect profits for more than a year. And yes, as the losses will continue, this unit will be shut down. Now the clock is ticking... From 12 to 24 months i the time-frame when Microsoft exists the phone manufacturing business. And Windows Phone side of Windows 10, I would not count on much R&D ivolvement on this dead path. The next Windows version (I would suggest it might be called Windows 11) will no longer bother to support handsets, only tablets and PCs... 

By the way, a possible shut-down date at Microsoft's remaining phone business might be a little before newly returned real Nokia smartphones on Android start their sales next year, similar to how Elop was fired just before Nokia CEO officially admitted they are coming back to phones..

The sound you heard was the last Windows Phone develoeprs jumping off this sinking ship.

Comments

[Earendil Star]

Ah, I forgot to mention this:
- Lumia users have just been shafted again. Cool. Just as it happened time and again since 2011.
- People never learn. Nor MS partners. Nor its customers.

Peace to you all.

[deadonthefloor]

I agree with Tomi's assertion that it is Skype that made Windows Phone a non-starter.

To add to that, I'd also put forth that the PBX integration with Exchange also rubbed the carriers the wrong way.
This cannibalized a revenue stream (Voicemail) that carriers get on a per number basis. The fact that Exchange handles voicemail better than most telecom systems just adds insult to injury.

I can see why the carriers don't want to play.

The only solution for them is to shut down services that compete with carriers, or remove the carriers from the equation altogether by selling after-market over the top devices that just happen to have SIM slots.

[chithanh]

@Earendil Star:
Pretty much on the point.

Carriers are not the only, but maybe the most important reason why WP didn't succeed. There are indeed many more:

Customers who got shafted with WP7.
Desktop users who were forced to use Windows 8 and learned to hate Metro.
Microsoft's refusal to support industry standard interfaces like OpenGL ES and instead rely on homegrown proprietary ones like DirectX.
The poor platform API and concurrency models (Who does network I/O in the UI thread? XNA/Silverlight! Who supports only asynchronous file I/O? WinRT! The list goes on...)
The Kafka-esque bureaucracy which app developers faced, plus them often going months without ad payouts.

I'm sure there are more, these are just the ones I remember from the top of my head.

[eduardo m]

If there is anyone out there who still thinks Microsoft might stick with WP, let me ask you this:

How high would WP market share have to be six months from now, and a year, for Microsoft to not decide to drop it?

[Mike]

Wall Street Journal posted the headline: "Why Can’t Microsoft Figure Out Smartphones?"...
The Answer: Cause they didn't read Communities Dominate Brands blog.. :-)

[Mike]

My next thinking is.. hopefully the new Nokia will absorb those talented ex-Nokia staff that will be laid off to build their next smartphone in 2016.. :-)

[spawn]

I am still fascinated how long WP survived. Nothing but a giant failure from the beginning. Everybody knew WP failed the market back in 2011 already and if it wasn't for Nokia, who gave new hope to the WP-zombie, the thing would have come to an end in 2011 already rather then only today. This wasted years of huge cash burning took away any opportunity Microsoft had left to keep Windows-as-a-lockin-platform and hence cashcow-control in place. Of course things started way earlier, like when Ballmer took over, but this, the lose of the war of ecosystems on mobile. is what hits most. Ballmer's and by conclusion Microsoft's Waterloo.

Neverless Satya seems to progress fast refocusing the company. Something unbelievable hard taken the companies history and stand just some years ago. As such much respect for the work done on one side and much sorrow for more (Ex-)Nokians suffering from the Elopian maddness caused by $20 million fracking bonus that "somehow" slipped unnoticed into his CEO-contract.

[abdul muis]

@chithanh

"@John Fro
> MS took on the task of competing with Apple because of investor demand

Actually, no. Investors have mostly been critical with Ballmer's costly world domination plans. Bing, Windows Phone, and Surface (only 1 out of 6 a success, the 7th still undecided) are mostly money sinks. An no investor likes that.
Tomi blogged about Sun Tzu, you attack your enemy where he is weak, not where he is strong. Attacking Google in search, Apple in tablets and both in mobile is not something a rational investor would support."

I want to add to what you said to @John Fro.

@John Fro think that microsoft investor is a mere microsoft investor. This is totally wrong. 'Professional' investor don't put all their egg in one basket. They spread their investment. And having microsoft to challenge google (bing vs. google) or microsoft to challenge apple (surface vs. ipad) might means that investor were losing money because of his money vs. his money in other company.

[abdul muis]

@Mike

"Wall Street Journal posted the headline: "Why Can’t Microsoft Figure Out Smartphones?"...
The Answer: Cause they didn't read Communities Dominate Brands blog.. :-)"

So true... LOL
I was surprise by today announcement by Nadela/Microsoft. I was surprised that Tomi really nailed it with the accuracy/prediction like a very good fortune teller.

BTW, congratulation for TOMI for being the most accurate forecaster for this subject!!!!

[MIOC]

If Elop was a trojan horse, he was Nokia's not Microsoft's. Selling failed phone business to Microsoft with their OS must be one of the best business decisions Nokia ever made.

And now next year this time Nokia will probably come up with their own Android smartphone. Which will be probably made by Foxconn, after they got rid of their factories.

And now Microsoft can be crowned the king of dumbphones.

[zlutor]

Sad story...

Btw. What is the situation with the factories?
Are they preparing for making Nokia phones again? 😉

From technical point of view it would be perfect for Nokia - quality and processes are known, maybe top personnel, too.

But that would be different kind of partnering we are expecting from Nokia to come...

Maybe when Nokia go for own distribution channel only...

[chithanh]

@Wayne Brady
> Nadella said he was committed to 1st party hardware including WP and listed the 3 markets they intend to continue making phones for.

If you carefully read what Nadella wrote, then he promised to make hardware only for 1 market, namely "flagship devices" for the Windows fans. The enterprise market gets "experiences" and the value customers get "communication services", which does not necessarily mean hardware.

It would be consistent with his words if CityMan/TalkMan were the only phones to launch this year. Maybe they could be even Surface branded.

[cornelius]

@Wayne Brady

Universal apps with Windows 10 is a marketing gimmick and will fail. Here is why:
1. Desktop apps (using mouse and physical keyboard) have a different type of user interface compared to touch screen apps. Merging them would be a disaster, as demonstrated by Windows 8's failure to converge the Windows experience across platforms.
2. (This is more technical) The universal apps concept is achieved by bundling into the executable the libraries that are specific to each platform. Basically when you compile an app in order to create the executable file that you deliver to your customers, you must target specific platforms. If you target all platforms, then you have to include into the deliverable executable all the libraries for all the platforms. This means two things:
a) The apps that are already compiled, are compiled only for one platform, so they don't work across platforms, you need to recompile them in order to achieve that.
b) The more libraries you include into your executable, the larger it gets. That means they will take more space in your storage. This creates a problem similar to the problem of Windows 8 installation taking 25 GB of space and the customers were upset when their Windows tablet was advertised to have 32 GB of flash storage but they got only 7 GB of usable space. Compare this to an Android installation which needs 4 GB of storage space. In conclusion the new executables will be big fat pigs.

[zlutor]

@ExNokian: I know what happened with ex-Nokia factories...

My question was related to Microsoft owned ones. They must be idle nowadays... 😉

[FortuneOne]

@John

"Apple doesn't have these internal conflicts since they are more or less a one-trick-pony"

How wrong you are. This is the biggest error that Apple's competition can make.
Apple is hardware AND software company that excels making their products joy to use. They design their hardware and integrate it well with the software. Marketing is also in their blood.

There is no other company that can do so many things under one roof. (computers and mobile phones)

[Wayne Borean]

Um, doesn't anyone know their history? Microsoft's failure in the phone OS business dates back to September of 1993, when Nathan Myrhvold wrote this fascinating (and somewhat prescient) piece.

The link is to an RTF format document. Read it.

http://www.microsoft.com/about/companyinformation/timeline/timeline/docs/bp_roadkill.rtf

[Winter]

@FortuneOne
"There is no other company that can do so many things under one roof. (computers and mobile phones)"

You might want to take a look at Samsungs' Wikipedia page. Samsung can build almost anything that Apple might ever need, including the ships to get it to California. And they also do software.

[CuriousGeorge]

Any ideas what happens to NFC support in the future? Are they going to drop it or continue? When will they stop manufacturing current phone models?

[Tomi T Ahonen]

Few comments,

to Earendil and Chithanh

Yes, I totally agree with you that in addition to Skype, Microsoft managed to mess up the Windows Phone project on many other levels too (and Elop caused far more damage to it further even than that, on Nokia side). There are more damaging parts to the total mess but probably - we will never know - probably those other problems were not fatal. Microsoft with Nokia and Windows Phone could have now something like 8% or 10% market share in third place if there was no Skype, and those other problems were mostly then fixed in the typical 'Microsoft way' - wait for the next version.

Just wanted to note, yes, I read the comments and I agreed with that view :-)

To Mike and abdul - thank you!!!! (Mike that was very funny). BTW they do read the blog (you'd be surprised who all read this regularly), they just don't always want to believe it haha...

zlutor - haha imagine that, Nokia to hire Microsoft to licence Nokia Android designs to sell as genuine Nokia's alongside Lumia to give those factories some activity... ok, that is going too far into fantasyland but haha yeah... would be funny indeed. (and again, sadly, that organization from factories to sales, would do the BEST job of getting those licenced Nokia Android smartphones to succeed, compared to anyone else in the world)

Tomi Ahonen :-)

[Paul]

Executives in Microsoft are ignorant, without exception. Not because they lose billions of dollars, it is their or shareholders’ money so they can flush down the drain whatever they want, but because now 8000 workers are thrown out on the street. Buying Nokia was like buying saab to establish a market share in the automotive business. Mad decisions of American executives destroy companies, fully functioning in Europe.