For many Microsoft employees, this is just another Wednesday morning like any other. But for close to 2,000 people it’s going to be a day to remember. The company announced that it’s “streamlining” its smartphone business by laying off about 1,850 people worldwide, including 1,350 people in Finland and 500 elsewhere. The move will see Microsoft take a $950 million financial hit, and it marks the death of the Nokia-born Lumia phone brand.

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We had high hopes for the Microsoft-Nokia endeavor, but that proved to be largely a fruitless initiative. Microsoft did away with Nokia branding in the years that followed the acquisition, and now it’s slowly disposing of the remains of the former smartphone maker. A few days ago, Microsoft announced that it reached an agreement to sell the feature phone business to Foxconn for $350 million. Ironically, the Chinese devices manufacturer will build Nokia Android smartphones and tablets as well in a venture with Nokia and a newly formed company.

All in all, the Nokia business was an epic fail for Microsoft. The company paid $7.1 billion for the mobile division and patents in 2013, and in July last year, the company announced plans to lay off 7,800 people and take an impairment charge of $7.6 billion. Add to that the $950 million hit that will follow this new round of layoffs, of which $200 million is severance pay according to Ars Technica, and you’ve got the complete picture.

Rumors say that Microsoft will make a Surface phone in the future, but nothing is confirmed. In an email to staff, Executive Vice President of the Windows and Devices Group Terry Myerson said the company plans to be “more focused” on its phone efforts, saying that “we’re scaling back, but we’re not out!”He says the company plans to “develop great new devices,” though it’s not clear what that means.

Whatever the case, and no matter how Microsoft tries to sugarcoat it, the fact remains that Microsoft’s smartphone-making business has come to a halt, at least for the time being.

Myerson’s full memo can be seen below.

To: Microsoft – All Employees
From: Terry Myerson
Date: Wednesday 5/25, 2AM Pacific Time
Subject: Focusing our phone hardware efforts

Team,

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.

Terry

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