Purchasing a company’s entire mobile devices branch is no small feat - not when the deal costs over $7 billion. And that’s without factoring in the cost of running that new branch, bringing it under the company’s existing wing, and making it more profitable than its previous owner did. Yet that's the job that Microsoft signed up for when they bought Nokia’s Devices and Services business earlier this year.
Not only was that portion of the Finnish company business taken on, but Microsoft agreed to amass $600 million worth of annual savings - within 18 months - as part of the transaction. But 3 months in, the company doesn't look to be chipping away at that number in the slightest. So how are they going to rack up those savings? To put it lightly, Microsoft is going to trim the fat.
According to a Bloomberg report, the company is set to announce thousands of job cuts later this year that will not only have a huge impact on their workforce, but potentially on the gadgets and products that consumers are already enjoying as well.
Revealed by sources within Microsoft, they say that the cuts will be made to accommodate Nokia Oyj’s handset unit and so the branches of Microsoft and Nokia that overlap — likely in business, marketing and engineering — will be the ones hit hardest. The sources also claim that this round of cuts will be the largest in the company’s history, offering more job losses than the 5,800 jobs cut in 2009 that happened as a result of the financial crisis.
Credence is lent to the rumors by the fact that they follow the new mission statement which Microsoft CEO Satya Nadella (who took over from Steve Ballmer in February) released last week, calling for greater emphasis on Microsoft’s mobile, cloud computing, and productivity software businesses. The statement also called for Microsoft to “flatten the organization and develop leaner business processes,” which, in hindsight, seems like a neon signpost pointing directly towards job cuts.
It's possible that the Xbox division may get through unscathed, but that all depends on how the plans are implemented. For example: in Nadella’s statement he suggested that Windows Phones could benefit by working with Xbox consoles. And while the second screen features are bold enough (providing additional content and gameplay can make controlling the Xbox One a whole lot easier) many would ask that the focus be put on developing exclusive first-party games instead. In fact, the lack of established, recognizable exclusives was something that saw Microsoft receive backlash upon the Xbox One’s reveal in the first place.
Furthermore, Xbox’s global marketing efforts could also be diminished with these cuts, as the sources explain that the European marketing team for the brand could face job losses. This certainly won’t be helpful to the steadily growing sales of the Xbox One; although the console performs well in Europe, PlayStation has historically performed better - something reflected by sales reports out of the territory that say the PS4 has sold more units (both in the UK and on the continent).
It’s unlikely that possible plans for cloud features on Xbox (Microsoft originally said that cloud servers could be utilised by developers) will rally up these sales either as even cloud-related jobs will be hit as developers take on the role of bug testers and bug testers lose their jobs, but we’ll know more about Microsoft’s plans for this on July 22nd at the latest as Nadella has explained he’d offer more explanation then.
Alternatively, the sources say, these job cuts could take place as soon as this week. So stay tuned for more updates.
-
Source: Bloomberg, Nokia, The New York Times