In April 2007, Microsoft CEO Steve Ballmer was interviewed by USA TODAY's David Lieberman at the sixth USA TODAY CEO Forum, in conjunction with the University of Washington Business School. Ballmer was asked what he thought of the coming iPhone from Apple. He conceitedly laughed it off. Before retiring from Microsoft, Ballmer stated that looking back he wished he could have pursued the mobile market earlier, as Microsoft missed the boat. Ballmer noted that "We would have a stronger position in the phone market today if I could re-do the last 10 years." Mr. Ballmer said that the acquisition of Nokia Corp. was very important to the future for Microsoft." Yet since his departure, the Nokia acquisition has been seen as an overreaction, a desperate move to enter the smartphone market quickly without a plan to get the ball rolling quickly. Today, Microsoft's new CEO Satya Nadella announced a second round of job cuts in the 7800 range to hopefully finalize the Ballmer-Nokia debacle.
FBR Capital Markets analyst Daniel Ives noted about today's jobs cuts announcement that "Microsoft's deal to acquire Nokia's handset business in 2013 -- one of the last acts of outgoing CEO Steve Ballmer -- has been a 'head-scratcher' from the beginning."
According to reports from USA Today and the New York Times, "The Company will also take an impairment charge of $7.6 billion related to its acquisition of Nokia's handset business for more than $7 billion, along with a restructuring charge ranging between $750 million and $850 million.
In an email sent to employees earlier today, Microsoft CEO Satya Nadella stated that "We are 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. In the near-term, we'll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility."
In June, Microsoft reshuffled its executive ranks, the latest sign that it is hitting the reset button on its smartphone hardware business. The moves included the departure of former Nokia chief Stephen Elop.
The market mildly applauded Nadella's announcement with shares of Microsoft slightly up this morning.
The key to Nadella's announcement may rest in his view of "reinvention in mobility." Microsoft's Windows 10 will mark the beginning of a new wave of services and features that could spark new interest in Windows Phones. In the longer term, Microsoft is looking to a dual display smartphone, invisible smartphone controls and a possible 3D user interface for starters.
Microsoft's move into hardware to date hasn't been able to move consumers in numbers needed to make an impact. Yet you have to applaud Nadella's positive march forward while he attempts to clean up Ballmer's debacle.
It took the late Steve Jobs years to take Apple from near death to success and in the early years it was tentative if Jobs could actually pull off a miracle to keep Apple alive. Apple's turnaround story is likely to be one that goes down in history books for being the most amazing turnaround of all time.
While Microsoft is unlikely to match Apple's turnaround success, Nadella may be the CEO that finally steers the company back to health and moving forward again. Many would like to see the Windows Phone being in a stronger position to challenge Android. So while the news of cutting 7,800 jobs looks bad as a headline today, I think it's a sign that Microsoft's mobile plan has finally found its bottom and there's nowhere to go but up going forward.