The Latest Layoffs And Write-Down Of Assets Reflect Lack Of Long-Term Mobile Strategy At Microsoft Corporation (MSFT)
Microsoft Corporation (NASDAQ:MSFT) just exposed its serious weakness – a lack of viable long-term strategy for Mobile. The company announced that it will take a $7.6 billion write-off relating to the Nokia phone business that it acquired for over $7.2 billion last year. The company intends to shut the unit and also layoff thousands of employees. Everyone is visibly shaken, from employees to customers to investors, as Microsoft appears to be losing focus.
Shutting Nokia phone unit
Microsoft will lay off 7,800 workers following the shutdown of the Nokia handsets business. If that happens, the company will have eliminated nearly 26,000 positions since Satya Nadella assumed the CEO role a little over a year ago.
Although Nadella seems focused on simplifying the structure of Microsoft and getting the company deeper into cloud and mobile, challenges and questions abound. Investors, and even customers, are yet to clearly see how the efforts being made will add long-term value to the company. As long as investors and customers have questions or perhaps doubts about Microsoft’s long-term, the stock will likely remain under pressure.
A dangerous miscalculation
It is now turning out that it was a big mistake for Microsoft Corporation (NASDAQ:MSFT) to pay more than $7.2 billion for Nokia’s devices and services business. The division was already in bad shape, losing market share and money at the same time. The company is not only taking a huge write-off, but its mobile strategy also now looks shaken, if not hollow.
Microsoft didn’t help things by not acting with a sense of urgency following the Nokia purchase and did not allow any traction gained with Windows Phone to compound. Just before the purchase of Nokia, Windows Phone was experiencing solid growth. However users have been waiting for a flagship upgrade to their Lumia 1020 and 920 devices for multiple years and enthusiasm has been dampened.
To improve its position in the hotly contested mobile market, Microsoft needed to first win the war for app developers. The company didn’t, and there was no way people were going to see value in its handsets without great apps. Instead the company has seen companies like Bank of America drop their mobile banking app for the platform. Sales have remained at disappointing levels, indicating that Microsoft is in deep trouble on the mobile front.
Games unlikely to save Microsoft
Microsoft Corporation (NASDAQ:MSFT)’s bet on gaming also looks risky. The company spent $2.5 billion to acquire Minecraft, but it appears unlikely that the company will recoup that investment. As such, it shouldn’t come as a surprise to anyone if Microsoft takes Minecraft the way of the Nokia phone unit – write-off.
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