clock menu more-arrow no yes mobile

Filed under:

Microsoft is giving up on consumer smartphones, too

The company is taking a $950 million charge to unwind the last vestiges of the Nokia deal.

Microsoft's Lumia 635 smartphone Recode

Microsoft is further scaling back its flagging phone business, exiting the consumer market and cutting another 1,850 jobs.

As part of the move announced Wednesday, Microsoft will take a $950 million charge and cut what little remained of its Finland-based phone hardware business, unwinding the last of its disastrous $7.2 billion acquisition of Nokia's phone unit.

Last week, Microsoft announced separately that it was selling what was left of its low-end "feature phone" business.

The company has been scaling back its phone ambitions ever since the Nokia deal closed, with CEO Satya Nadella quickly shifting to a strategy focused on bringing Microsoft's software and services to Android and iOS rather than trying to convince phone buyers to shift to Windows.

Despite all the cuts — and having already seen its market share dip below 1 percent — Microsoft says it isn't totally out of the phone-making business.

The company insists it will continue to serve phones aimed at the business market and license Windows 10 to any other hardware makers that want to give Windows Phone a try.

"When I look back on our journey in mobility, we’ve done hard work and had great ideas, but have not always had the alignment needed across the company to make an impact," Microsoft's Windows and Devices head Terry Myerson wrote in an email to staff.

While the company said Wednesday to expect new Microsoft-made phone models, it declined to offer any specifics on its future hardware roadmap or to say why an even more decimated phone lineup will have greater appeal than the current one.

Microsoft moved last summer to limit the number of countries in which it sold phones and to focus on three main customer segments: Windows enthusiasts, entry-level smartphones and the business market.

Already by then it was hard to see how Microsoft could win by scaling back.

"It’s hard to see Microsoft’s massive phone layoffs leading to something other than an eventual exit from the phone business," Recode wrote at the time.

Here's Myerson's full memo to Microsoft employees:

To: Microsoft - All Employees

From: Terry Myerson

Date: Wednesday 5/25, 2AM Pacific Time

Subject: Focusing our phone hardware efforts


Last week we announced the sale of our feature phone business. Today I want to share that we are taking the additional step of streamlining our smartphone hardware business, and we anticipate this will impact up to 1,850 jobs worldwide, up to 1,350 of which are in Finland. These changes are incredibly difficult because of the impact on good people who have contributed greatly to Microsoft. Speaking on behalf of Satya and the entire Senior Leadership Team, we are committed to help each individual impacted with our support, resources, and respect.

For context, Windows 10 recently crossed 300 million monthly active devices, our Surface and Xbox customer satisfaction is at record levels, and HoloLens enthusiasts are developing incredible new experiences. Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same. Thus, we need to be more focused in our phone hardware efforts.

With this focus, our Windows strategy remains unchanged:

1. Universal apps. We have built an amazing platform, with a rich innovation roadmap ahead. Expanding the devices we reach and the capabilities for developers is our top priority.

2. We always take care of our customers, Windows phones are no exception. We will continue to update and support our current Lumia and OEM partner phones, and develop great new devices.

3. We remain steadfast in our pursuit of innovation across our Windows devices and our services to create new and delightful experiences.Our best work for customers comes from our device, platform, and service combination.

At the same time, our company will be pragmatic and embrace other mobile platforms with our productivity services, device management services, and development tools -- regardless of a person’s phone choice, we want everyone to be able to experience what Microsoft has to offer them.

With that all said… I used the words “be more focused” above. This in fact describes what we are doing (we’re scaling back, but we’re not out!), but at the same time I don’t love it because it lacks the emotional impact of this decision. When I look back on our journey in mobility, we’ve done hard work and had great ideas, but have not always had the alignment needed across the company to make an impact. At the same time, Ars Technica recently published a long story documenting our journey to create the universal platform for our developers. The story shows the real challenges we faced, and the grit required to get it done. The story closes with this:

And as long as it has taken the company, Microsoft has still arguably achieved something that its competitors have not... It took more than two decades to get there, but Microsoft still somehow got there first.

For me, that’s what focus can deliver for us, and now we get to build on that foundation to build amazing products.


This article originally appeared on