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Microsoft restructure 'major surgery, long overdue'

10 Jul 15

Microsoft’s restructure of its phone business has been deemed ‘major surgery that is long overdue’ by one business expert.

Warwick Business School’s Professor Mark Skilton, who researches mobile ecosystems, says the restructure is indicative of the changes many companies are undergoing as they seek to reposition themselves in the true digital economy.

Skilton’s comments follow Microsoft’s announcement yesterday that it is cutting writing down its Nokia acquisition to the tune of US$7.8 billion, and axing 7800 jobs, mainly from the phone business, as it ‘restructures the business with a ‘more effective and focused phone portfolio’.

In an email to staff, Microsoft chief executive Satya Nadella says the company is moving from a strategy to grow a standalone phone business to a strategy to grow and create ‘a vibrant Windows ecosystem including our first-party device family’.

Skilton, meanwhile, says simply: “The mobile phone market has gone.

“Nadella realises this and is focusing on building integrated cloud platforms of services to ‘join up the dots’ of carriers, content and mobile devices.

“This is major surgery that is long overdue,” Skilton says.

He says without diagnosing the failing of the Nokia technology platform investment, ‘it’s clear Microsoft don’t have the scaling and user community to support it in a highly competitive market’.

Skilton says the realignment of the Microsoft strategy is symptomatic of many large and smaller companies which are looking to reposition themselves in the true digital economy this year.

“We have moved past the cloud computing, big data and social eras into a new ‘digital business’ landscape that is fully omni-channel – that is a seamless experience for the user on any device.”

Skilton says that market is an estimated US$8 trillion opportunities as companies use mobiles, the internet of things and cloud networks to create a new customer experience.

“It looks like Nadella will bring a stronger focus on what Microsoft does well in its own backyard of cloud ecosystems,” Skilton says.

“Many companies have similar issues and want to consolidate their IT services into a strong customer experience delivery, building ‘connected customer journeys’.

“What happens next for Microsoft will be critical in providing joined-up cloud and service delivery now that the ‘shop window’ – the mobile – has been tossed away.” 

Nadella says Microsoft will narrow its focus to three customer segments - business customers, value phone buyers and Windows fans - where it believes it can make unique contributions and differentiate through a combination of hardware and software.

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