Microsoft's plans to lay off 18,000 people in the next year and its decision to kill off the Nokia X line of low-cost Android phones may be more than short-term cost-cutting measures -- they could well portend Microsoft's selling off its Windows Phone line. So says at least one analyst. Is he on target?
The layoff plans heavily target Nokia, where 12,500 of the layoffs will happen, CEO Satya Nadella said. Those cuts will be both to professional and factory workers.
That wasn't much of a surprise. More surprising was that Microsoft is killing off the low-cost Nokia X line, aimed at emerging markets. That line is Android-based, but features Microsoft services on it, such as Outlook.com and Skype. Its interface looks much like Windows Phone. The idea was that Microsoft would make money on services, and that when users moved up the economic ladder, they might purchase Windows Phone devices.
The strategy, only a few months old, was killed before it got a chance. Nadella said that Microsoft will replace the Nokia X line with low-cost Lumia Windows Phones.
This clearly doesn't make sense. Why set a drastic new mobile course, and then abandon it before it even started? Jack Gold, of J. Gold Associates, thinks he has the answer. He believes that the layoffs and killing the Nokia X line are the first steps in Microsoft's plan to sell off Windows Phone.
Gold told Computerworld that killing the Nokia X line is "sound strategy...but is unlikely to be very successful in greatly increasing market share." He added that it was a:
"first step down the path of making the phone business saleable."
He expects that Microsoft will sell off Windows Phone in the next 18 months.
Is he right?
I don't think so. First, who would buy it? After several years, it still has less than 4% global market share, and that share seems to be shrinking. Kantar Worldpanel ComTech's most recent figures show Windows Phone with minuscule market share in the world's two largest smartphone markets: 3.8% in the U.S. and 0.6% in China. It's been dropping in both places. And growth has stalled in Europe, where Windows Phone had made some headway. Kantar Worldpanel ComTech says that market share is at 8.1% there now, up from 7.1% a year ago. But in November 2013, Windows Phone market share in those countries was 10%.
Why would anyone buy a business with tiny market share, that could require billions in investment, and that faced an uncertain future at best?
I also don't think Microsoft is interested in selling. Nadella's memo about the future of Microsoft made clear that Microsoft believes its future is in mobile and in the cloud. The very first line of the memo had this to say:
"We live in a mobile-first and cloud-first world."
Later, he wrote:
"Our passion is to enable people to thrive in this mobile-first and cloud-first world."
And then to drive the point home, he wrote this:
"At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world."
None of that sounds like a person laying plans to sell off its mobile division. My guess is that it won't happen.