Expect Further Cuts at Microsoft Devices – Analyst

Respected Finnish analyst predicts further downsizing at the former Nokia devices business and hints at resurgence of mobile startups in Finland.

July 22, 2014

3 Min Read
Expect Further Cuts at Microsoft Devices – Analyst

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

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