Microsoft announced today that is was scaling back its phone manufacturing business, and would be laying off 1,850 employees. The company will be cutting 1,350 jobs in Finland where the mobile phone division is based, with another 500 being cut globally. Although its manufacturing future is uncertain, Microsoft has promised to continue supporting its current Lumia devices.
Microsoft's decision to purchase Nokia's phone division for $7.2 billion has proven to be a disastrous one for the company. Since entering the business of phone manufacturing, the company has struggled to obtain a significant share of the market. Microsoft phones currently account for less than 1% of mobile phone market. The company's poor performance in the mobile market has led to previous rounds of layoffs since the acquisition of Nokia's phone business. 7,800 jobs were cut last year in the mobile division.
Earlier this month the company closed a deal to sell off its low-end phone business to Foxconn and HMD for $350 million. 4,500 Microsoft employees will transfer to the two companies as a result of the deal. A manufacturing plant in Vietnam was also included in the deal.
With the sale of assets to Foxconn and the planned layoffs, it looks like Microsoft is getting out of the phone manufacturing business entirely. One Finnish union representative stated as much. "My understanding is that Windows 10 will go on as an operating system," he told Reuters, "but there will be no more phones made by Microsoft."
However, an internal memo suggests that Microsoft still intends to "develop great new devices." Although the references to developing devices may not have been referring to phones exclusively or even at all. It might have been referring to new Xbox One models under development or the streaming devices that they are reportedly working on. Referring to mobile platforms the memo specifically states, "we’re scaling back, but we’re not out!" Although there is very little information available about the company's future plans for phone manufacturing, the memo states that the company needs to be more focused in its mobile efforts. This was echoed in a public statement by Microsoft CEO Satya Nadella who said, "We are focusing our phone efforts where we have differentiation." The company has also stated a focus on selling phones to businesses rather than ordinary consumers.