Comment So it's happened. Microsoft will adjust its books and its staff roster to largely erase its purchase of Nokia. Yesterday, CEO Satya Nadella announced an "impairment charge" of $7.6bn related to the acquisition, along with a reduction of 7,800 employees, primarily from "the phone business".
The announcement makes sense to the money folk since the business was losing cash, but it is odd from a strategic perspective.
It is reasonable to assume that Microsoft did not acquire Nokia because it wanted to be in the smartphone hardware business, but rather to protect the ecosystem, to ensure that Windows has a presence on devices from PCs to tablets and phones.
Prior to Nokia's adoption of the platform, Microsoft's other phone partners did a dismal job of supporting Windows Phone.
At the time it also seemed to be a long-term strategy. Windows 10 was announced in September 2014 along with the promise of "one application platform for our developers", according to Windows VP Terry Myerson, supposedly revitalising both Windows Phone and the Windows app platform by letting developers write a single app that runs on both.
This had the unfortunate side-effect of placing Windows Phone into a waiting-for-Windows-10 phase. No high-end phones were produced and it was obvious that the platform could not grow significantly until both phone and PC moved into the Windows 10 era.
Previews of Windows 10 Mobile show a promising OS that is significantly different and more powerful than earlier Windows Phone releases.
The timing therefore of Nadella's sharp cuts to the platform, along with the write-off of the entire investment and the earlier departure of ex-Nokia CEO Stephen Elop, is therefore surprising, since it comes before the release of Windows 10. It is as if the company itself has no confidence in its own forthcoming app platform.
Nadella says Microsoft is still doing Windows on phones:
I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near-term while driving reinvention.
We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.
Actions speak louder though, and writing off the phone business does not speak of commitment. If Nadella thinks that Microsoft's hardware partners will step up to fill the gap, he is mistaken. They are too busy with Android, and remember the failure of Windows Phone from its first botched launch in October 2010.
The perception of many observers is that Nadella's announcement has in effect killed Windows 10 Mobile.
What then is left of the Universal Windows Platform (UWP)? This also targets Xbox, HoloLens augmented reality headsets, and IoT devices including Raspberry Pi, but the most synergy comes from apps designed for both PC and Windows 10 Mobile.
The effect of Nadella's announcement is to discourage any developers who still believe Microsoft can deliver a successful platform across PC and mobile.
Perhaps they are being rescued from futile investment, but it is odd that the company is taking these steps before its Windows 10 mobile strategy has had a chance to deliver. ®