Microsoft To Lay Off Another 2850 Employees After Dismal Fiscal Q4 Smartphone Sales

Today is supposed to be a big day for Microsoft. It marks the one-year anniversary of the release of Windows 10 and the company is eagerly hoping that its straggling customers will make the last-minute free upgrade to the operating system before the price shoots up to $119 tomorrow.

However, Microsoft at the same time is witnessing a funeral of sorts for its smartphone division. The company announced back in May that it would eliminate 1,850 positions in its smartphone hardware business, and this week revealed that it will lay off another 2,850 employees globally over the next 12 months (again, primarily from the smartphone division).

Lumia 950 XL

These layoffs are in addition to the 19,000 positions that were retired during fiscal year 2015, and another 7,800 that took place earlier in fiscal 2016. This winding down of its smartphone operations is the end result of the company’s disastrous $7.2 billion acquisition of Nokia’s Devices and Services Division in 2014.

With the purchase, Microsoft welcomed 25,000 Nokia employees into its open arms, but most if not all of those employees have now been shown the door. And Microsoft itself has paid dearly for its smartphone blunder; not only with a $7.6 billion write down of its Nokia purchase, but also with a further erosion of its smartphone market share.

According to Gartner, Microsoft’s share of the global smartphone market now stands at less than one percent. Furthering this point, Microsoft revealed this week that its Lumia smartphone sales are still falling fast. The company reported total Lumia sales of 13.8 million for all of fiscal year 2016 (for comparison, Apple sold 40 million iPhones in its most recent quarter). Microsoft, however, did not explicitly state how many Lumia devices it sold during fiscal Q4 2016 (even though it provided these numbers for the previous three quarters).

SatyaNadellaandStephenElop Page
Microsoft CEO Satya Nadella and former Nokia CEO Stephen Elop back in 2014

But it we use the 13.8 million figure for the full year and back out 5.8 million, 4.5 million, and 2.3 million for fiscal Q1, Q2, and Q3 respectively, we’re left with just 1.2 million units sold for fiscal Q4 2016.

Given its increasingly untenable position in the smartphone market, it should come as no surprise that Microsoft has been giving conflicting information on the future of its Lumia smartphone division and Windows 10 Mobile in general. In late March, Windows chief Terry Myerson had this to say about Microsoft’s focus on smartphones:

We're fully committed to that 4-inch screen, there will be a time for it to be our focus, but right now it's part of the family but it's not the core of where I hope to generate developer interest over the next year. There's no lack of recognition to realize how important that form factor is, but for Microsoft with Windows and for our platform it's the wrong place for us to lead.

Microsoft attempted to walk back those statements in late April in an email, writing:

Let me be very clear: We are committed to deliver Windows 10 on mobile devices with small screen running ARM processors. 

We are currently in development of our next generation products and I wanted to reconfirm our commitment to Windows 10 Mobile. We believe in this product's value to business customers and it is our intention to support the Windows 10 Mobile platform for many years. We have a device roadmap to support that from Microsoft as well as our OEM partners who will also be selling an expanded lineup of phone devices based on this platform.

Whatever the case, Microsoft needs to stop the bleeding fast, or we might not ever get a chance to sample the Surface phones that are reportedly in development.