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Is Microsoft set to kill off handset business?

Michael Garwood
September 6, 2016

• Handset division “decimated” • No roadmap revealed beyond 2016

Microsoft’s future in the handset market was brought into serious question last week, following major cuts to the UK team and claims by former staff that a decision to exit by Christmas has already been made.

The US firm announced radical restructuring plans back in May, which would see around
1,850 jobs cut from its global workforce, primarily from its smartphone division.

Since then around 100 jobs have gone from the firm’s UK head office in Reading. Around 30 of those were from its handset team, which has been cut by around “90 per cent”.

According to one former senior member of that handset team, who was made redundant in June, all staff received an internal video message from Microsoft CEO Satya Nadella (pictured) outlining the changes to the company.

The biggest of which was its plans to exit the smartphone space.

Clear message
“We found out about the job cuts, first from Satya Nadella and then from the various division heads in the UK,” said the former exec who requested to remain anonymous having signed strict confidentiality agreements on his leaving.

“In the announcements, it was made clear they were pulling out of devices and will not be making any new phones,” he said.

“They will be fulfilling any outstanding orders, which I believe is until the end of this calendar year, but that’s it.

“We were even told we could start using handsets at work made by rival manufacturers and it wouldn’t be frowned upon,” he added.


No road map
Mobile News understands that Microsoft has not revealed its handset road map details beyond the end of this year to its key handset and distribution partners – raising further suspicions.

“We normally see what’s coming at least six months in advance, sometimes even up to a year,” said one leading Microsoft partner.

Another added: “We understand a device is due to come out in October and rumours of one modelled on the Surface remain, but we’ve not seen anything beyond Christmas. We’re not forecasting for major Microsoft growth this year and into next.”

The speculation, which Microsoft has refused to discuss, follows updated market share figures from Gartner, which show the Windows OS has plummeted to an all-time low of just 0.6 per cent globally, down from 2.5 per cent a year ago. In the UK, its share has fallen from 11 per cent to 4.9 per cent since June 2015.

Sales numbers also continue to fall significantly, with sales for its 2016 Q2 fiscal year down 73 per cent YoY to 2.3 million. Nokia had quarterly smartphone sales of around 8.2 million in its final quarter prior to being acquired by Microsoft in April 2014.

Dealers told Mobile News they wouldn’t be surprised to see Microsoft exit the handset space,  with some accusing it of bleeding the business dry – particularly in the UK, handing the incentive to its rivals.

The end is nigh
“The writing seems to be on the wall for the smartphone business,” said the director of one leading airtime dealer. “When they first bought Nokia, they seemed very serious about driving the handset business forward. Its advertising was strong, and I think most people wanted it to work.

“But the interest as time went on seemed to fade and the tap seems to have suddenly been switched off. I don’t know anyone in the UK team anymore, so all those relationships have been lost. That’s not a good business model.”

Another added: “You only have to see how much resource and noise Samsung are making in the channel. They smell blood with the likes of BlackBerry and Microsoft and from what we see, they are winning.”

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