Microsoft kills Nokia X project, announces 18,000 job cuts

Microsoft has announced cutting 18,000 jobs in the next year in what's believed to be its biggest round of layoffs as a part of ongoing restructuring efforts. The company also announced scrapping Nokia's X Android smartphones in favor of Windows Phone.

Microsoft CEO Satya Nadella stated that Nokia's Devices and Services business, which it acquired for $5 billion last year, will be most affected. Microsoft plans to cut 12,500 "professional and factory positions" by the end of the year.  In an email to employees, Microsoft CEO Satya Nadella explains that the company's new strategy is designed to make it "more agile" moving forward, allowing teams to work more freely.

Microsoft devices chief Stephen Elop details the company's renewed focus on Windows Phone. "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," says Elop. "We expect to make this shift immediately while continuing to sell and support existing Nokia X products."

Read full text of Stephen Elop's email to employees here.

Nokia launched the X Android series of smartphones earlier this year, which created a lot of excitement but lacked good hardware in the price category. Microsoft announced its successor the X2 just last month. The move comes as Microsoft says that it wants to focus on Windows Phone and its range of devices will run the company's own software and services.

Microsoft is also reportedly planning to scrape Nokia's feature phones, including the Nokia Asha series and Series 40. The devices will shift to what is described as "maintenance mode," and services to support existing devices will be shut down over the next 18 months. "This means there will be no new features or updates to services on any mobile phones platform as a result of these plans," says Jo Harlow, who heads up the phone business under Microsoft devices. Microsoft is also planning to offer Nokia MixRadio as a third-party service and until it is sold it has been moved into maintenance mode.

Here's the full text of Satya Nadella's message:

Starting to Evolve Our Organization and Culture

From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT
Subject: Starting to Evolve Our Organization and Culture

Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year. Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers. We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months. It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas. My promise to you is that we will go through this process in the most thoughtful and transparent way possible. We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Later today your Senior Leadership Team member will share more on what to expect in your organization. Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

First, we will simplify the way we work to drive greater accountability, become more agile and move faster. As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers. In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft. These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.

Satya

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Silky Malhotra

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