& cplSiteName &

Expect Further Cuts at Microsoft Devices – Analyst

Susan Fourtané
News Analysis
Susan Fourtané
7/22/2014
100%
0%

Microsoft's decision to drastically reduce the size of its Devices Group is unlikely to be the end of the blood-letting at what used to be the Nokia devices business, according to experienced and respected industry analyst Tomi Ahonen, who also believes Elop's days are numbered in his current role.

Microsoft Corp. (Nasdaq: MSFT) last week announced that it is to make 18,000 staff redundant, including 12,500 employees who joined when the software giant acquired the Nokia devices business earlier this year. (See Microsoft to Axe 12,500 Ex-Nokia Employees.)

Of the 12,500 ex-Nokia staff who will lose their jobs, about 1,100 will be in Finland, where the former Nokia R&D center at Oulu will be closed with the loss of 500 jobs. When Microsoft acquired the Nokia devices business, about 4,700 staff in Finland transferred to the new owner, so the Finnish cuts will affect almost a quarter of all those in Finland who made the transition. (See Microsoft Officially Closes Nokia Buy.)

Microsoft's decision is being regarded in Finland as a broken promise and a betrayal, and the Finnish government has called on the company to accept greater social responsibility.

Ahonen, a former Nokia employee who has been tracking the demise of the Finnish company's mobile phones business for years, and who was scathing in his criticism of the Microsoft acquisition, believes the job cuts are a clear indication that the Lumia handset line is failing, and that Microsoft Devices staff "should be mentally prepared" for further headcount reductions. "The prospects for Microsoft hardware, and especially low-cost phones, are not promising, so this unit is very much in jeopardy," Ahonen told Light Reading.

The analyst, who has just written an expansive blog explaining why he considers the demise of Nokia to be one of the most shocking recent disasters in the global economy, believes the negative impact of the Microsoft cuts will be felt particularly in Oulu, where the R&D unit outsourced work and had many local partners and other businesses reliant on the operation.

He also wonders how the staff who survive the cuts can be properly motivated, or any longer trust Stephen Elop, the Microsoft Devices chief and former Nokia CEO who announced the cuts in an ill-judged memo to staff last week. (See Microsoft's Elop Denies He Was a Trojan Horse and Eurobites: Elop's Golden Parachute Inflates.)

The analyst reckons Microsoft Devices is already on a slippery slope, with Elop having made a series of blunders. "Elop has mismanaged the [former] Nokia handset business so badly that those remaining with Microsoft handsets will be better off when Elop is removed from being in charge. Expect that within one year," predicts Ahonen.


What's the future of mobile? Check out our dedicated 5G content channel here on Light Reading.


But Ahonen also believes that the demise of the Oulu unit might kickstart some fresh innovation and startup activity. "There is hopefully a silver lining to this case, as Oulu's R&D work can now be released into ideas that various Finnish companies could maybe exploit… [ideas] that Microsoft, or Nokia under Elop, didn't necessarily see, or believe in," he said.

Finland has already started to lose faith in what was, until recently, the country's defining business. "I think Finland was already moving well past Nokia/Microsoft/Lumia, and not considering it the domestic phone brand anymore… [the cuts] only serve to further alienate Microsoft Lumia from the Finnish market. That won't bother Microsoft, as Finland is so tiny in the big picture," he added.

Ahonen believes that new businesses may spring from the remnants of the Oulu R&D unit, in much the same way that upstart smartphone developer Jolla has done during the past few years. (See Euronews: Jolla Claims a Sailfish Sellout .)

"Now would be a good time for Jolla to introduce a new model for Finland -- before Christmas, at least -- to capitalize on this," he added.

— Susan Fourtané, special to Light Reading

(13)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
jabailo
50%
50%
jabailo,
User Rank: Light Sabre
7/23/2014 | 9:46:58 AM
Re: No liferafts in the water
IBM never had a technological edge when it ran its COBOL and RPG shops...it simply had the largest base of existing code and trained programmers to entrench it.   Microsoft has that now in many business applications built on .NET and SQL Server.

As far as mobile, and so on, no it doesn't have a lock on those markets, but in its new form, does it need to?   We are entering what I call the Pocket Calculator era of computer pricing.    Like back in the early 80s when a pocket calculator went from an exotic tool to something you can pick up for $20 at the supermarket.   You can now get Android tablets in bulk for $33 off vendors on Alibaba.com!    So why bother "dominating" what is a commodity market?   You want high value return and that comes from business applications.  

The Azure Cloud (which I just read has increased its revenue by 50% this quarter) is the new IBM mainframe.

 The other thing is future business applications will become more and more machine-to-machine.   The final step of interface may not even appear in the system or only as an occasional window or model.   Business will take place between computers, even buying, selling and trading once all the monitors are in place.  Take inventory for example...that can be fulfilled automatically by computers as stock runs out.  But based on business rules encoded in .net and sql applications.  That's where a Microsoft House could shine.

 
Susan Fourtané
50%
50%
Susan Fourtané,
User Rank: Blogger
7/23/2014 | 9:26:30 AM
Re: VCs surely heading to Oulu...
Ray, 

"IT makes sense to me that Finland will now become a hotbed of mobile applications and  device startups, as long as there are some willing VCs...."

Every November Finland is flooded with VCs from Silicon Valley and Europe who come to the Slush startup conference. Maybe this year several new mobile apps and device startups from Oulu join the conference in Helsinki. 

-Susan
Kruz
50%
50%
Kruz,
User Rank: Light Sabre
7/23/2014 | 8:20:26 AM
Re: No liferafts in the water
@jabailo:

I totally agree with your reasoning but how do you see it happening? There isn't an area where they have an edge currently and they are trailing behind, even in the cloud business.

So how do they counterattack in order to secure desktop, or even ultimately, gain smartphones? Wearable?
smkinoshita
50%
50%
smkinoshita,
User Rank: Light Sabre
7/22/2014 | 10:41:21 PM
Re: No liferafts in the water
@Jabailo:  And on that note -- I wonder if they'll go down the same path and be split into smaller pieces.
jabailo
50%
50%
jabailo,
User Rank: Light Sabre
7/22/2014 | 9:51:58 PM
Re: VCs surely heading to Oulu...
SmartPhones used to cost $700...now you can buy them, like I did, on sale for $80.

Clever Finns may have sold the biggest white elephant of the century and moved on to where the action is.

 
jabailo
50%
50%
jabailo,
User Rank: Light Sabre
7/22/2014 | 9:42:13 PM
Re: No liferafts in the water
Their biggest strong point right now is business application computing platforms.  SQL server, the Azure cloud and development tools.

In that sense they may end up becoming what IBM was from 1970 to 1990s...the solid secure technology that as they used to say "no one got fired for choosing".
smkinoshita
50%
50%
smkinoshita,
User Rank: Light Sabre
7/22/2014 | 9:08:37 PM
Re: No liferafts in the water
@Jabailo:  I agree with the estimate of a failed gamble, that seems to be the Microsoft MO as far back as oh... say Windows Vista?

Microsoft didn't have to worry about such gambles back in the day because they didn't have competition like today's Apple & Google.  I don't think they ever really got the whole mindset of the Internet, and I think it's because they've always been a sort of socially stunted company.  It wasn't such a big deal when it was just a matter of nerd power, but with the greater connectivity of today those soft skills are really important.  That's my take at least.

The whole business is quite nasty and I think things will get worse before they get better, and there's going to be more messes that other people will have to clean up.  I hope for the best for those cut.
shashidhara
50%
50%
shashidhara,
User Rank: Light Beer
7/22/2014 | 8:32:59 PM
Re: VCs surely heading to Oulu...
Some more innovations....
kq4ym
50%
50%
kq4ym,
User Rank: Light Sabre
7/22/2014 | 5:47:45 PM
Re: VCs surely heading to Oulu...
It must be very disconcerting for Finland and the Finnish workers to find that all these cuts are taking place. It's probably true that the device manufacturing is coming to an end and Finns will look forward to more of the service end of the scale now, which hopefully can keep expanding to keep those workers productive and employed.
Ariella
50%
50%
Ariella,
User Rank: Light Sabre
7/22/2014 | 2:05:39 PM
Re: VCs surely heading to Oulu...
@Susan do you share Ahonen's cautious optimism in this instance? 
Page 1 / 2   >   >>
Light Reading’s Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Wednesday, July 27, 1:00PM EDT
The Changing Face of the Data Center World
Rodney M. Elder, Senior Solutions Architect, Equinix
UPCOMING COURSE SCHEDULE
Wednesday, August 3, 1:00PM EDT
The Central Office Re-Architected as a Data Center
Guru Parulkar, Executive Director, Open Networking Research Center, Open Networking Lab
Wednesday, August 10, 1:00PM EDT
Telcos & Open Source 101
Phil Robb, Senior Technical Director, OpenDaylight
Friday, August 12, 1:00PM EDT
The Role of Open Source in NFV
Jim Fagan, Director, Cloud Practice, Telstra
in association with:
From The Founder
The more things change, the more they stay the same for Juniper's next-gen comms solutions, and that's a good thing.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (0) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
LRTV Custom TV
NFV in 2016: Part 2 – Climbing the Virtualization Maturity Curve

7|19|16   |   06:56   |   (0) comments


Many of the initial use case implementations are single-vendor and self-contained. The industry is still climbing the virtualization maturity curve, needing further clarity and stability in the NFV infrastructure (NFVi) and greater availability and choice of virtualized network functions (VNFs). Interoperability between NFVis and VNFs from different vendors ...
Telecom Innovators Video Showcase
Versa Networks' Kumar Mehta on SD-WAN Managed Services

7|19|16   |     |   (0) comments


In Silicon Valley, Steve Saunders sits down with Versa's Kumar Mehta for an interview focused on why service providers are building SD-WAN managed services, and how Versa's telco customers are innovating.
LRTV Custom TV
Juniper Networks & The Evolution of NFV

7|19|16   |   06:01   |   (0) comments


Senior Juniper Networks executives talk to Light Reading Founder & CEO Steve Saunders about NFV developments and the recent independent evaluation by test lab EANTC of Juniper's Cloud CPE solution.
LRTV Interviews
CenturyLink Goes Beyond Managed WiFi

7|19|16   |     |   (0) comments


CenturyLink's managed WiFi allows enterprises, such as retailers and resorts, to track guest WiFi usage in order to help them better communicate with customers.
LRTV Interviews
AT&T Launches Network Functions on Demand

7|17|16   |   05:26   |   (0) comments


Roman Pacewicz, Senior Vice President, Offer Management & Service Integration, AT&T Business Solutions, discusses the operator's launch of its Network Functions on Demand service.
LRTV Interviews
Enterprise Pitch for Ciscosson

7|14|16   |   04:43   |   (0) comments


After seven months of near silence, Cisco and Ericsson executives publicly discussed details on their extensive partnership. Among the tidbits shared by Martin Zander, VP, group strategy programs, Ericsson, and Doug Webster, VP service provider marketing, Cisco: The partnership was initially launched to serve the service provider market, but is already gaining ...
Wagner’s Ring
Cisco Faces Up to Hypercloud Threat

7|13|16   |   02:42   |   (0) comments


Facebook, Amazon and Google mostly don't buy branded technology for their networks – they build their own. That's a threat to Cisco – and its competitors too – which face potentially dwindling demand for their product. Is Cisco up to the challenge? Light Reading went to the annual Cisco Live conference to find out.
LRTV Huawei Video Resource Center
Building a Better Connected Russia

7|13|16   |     |   (0) comments


At UBBS World Tour 2016, Alla Shabelnikova of Ovum shares the findings of a white paper outlining the challenges and opportunities of broadband rollout in Russia.
LRTV Huawei Video Resource Center
The Global Video Business

7|13|16   |     |   (0) comments


At UBBS World Tour 2016, Roger Feng of Huawei shares insights on the future of video business.
LRTV Huawei Video Resource Center
UBBS World Tour Moscow Highlights

7|13|16   |     |   (0) comments


At UBBS World Tour 2016 at Moscow, Huawei showcases its outstanding progress in video technology.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
September 27, 2016, Philadelphia, PA
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 6-8, 2016,
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Five of the Top 10 most targeted countries in Check Point Software Technologies' global Malware & Threat Index for Q1 2016 are in Africa.
Hot Topics
SoftBank Muscles In on ARM in $32B Deal
Iain Morris, News Editor, 7/18/2016
Ericsson 'Doubles' Savings Goal as Sales Slump
Iain Morris, News Editor, 7/19/2016
Kevin Lo's Move to Facebook: Sign of Things to Come?
Patrick Donegan, Chief Analyst, Heavy Reading, 7/20/2016
Facebook Gets Its Drone On
Ray Le Maistre, Editor-in-chief, 7/22/2016
Is Dish Going Down the Drain?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 7/21/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
There's no question that, come 2020, 5G technology will turn the world's conception of what mobile networking is on its head. Within the world of 5G development, Dr. ...
I've enjoyed interviewing many interesting people since I rejoined Light Reading, but William A. "Bill" Owens certainly takes the biscuit, as we say where I come from.
Live Digital Audio

Our world has evolved through innovation from the Industrial Revolution of the 1740s to the information age, and it is now entering the Fourth Industrial Revolution, driven by technology. Technology is driving a paradigm shift in the way digital solutions deliver a connected world, changing the way we live, communicate and provide solutions. It can have a powerful impact on how we tackle some of the world’s most pressing problems. In this radio show, Caroline Dowling, President of Communications Infrastructure & Enterprise Computing at Flex, will join Women in Comms Director Sarah Thomas to discuss the impact technology has on society and how it can be a game-changer across the globe; improving lives and creating a smarter world. Dowling, a Cork, Ireland, native and graduate of Harvard Business School's Advanced Management Program, will also discuss her experience managing an international team focused on innovation in an age of high-speed change.