In its 2016 annual report, Microsoft said it would be cutting headcount by a total of 2,850 – 1,000 more than announced in a decision earlier in the year.
The reorganisation represents a further move away from smartphones in favour of pushing Microsoft’s strategic direction as a productivity and platforms company built on Office 365, Azure and Windows.
In May, Windows chief Terry Myerson confirmed Microsoft’s plans to reduce the headcount in its smartphone hardware business by 1,850.
At the time he said up to 1,350 jobs would be lost at Microsoft Mobile Oy in Finland, plus 500 other jobs globally.
The company has now extended its global restructuring.
“Approximately 2,850 roles globally will be reduced during the year as an extension of the earlier plan, and these actions are expected to be completed by the end of fiscal year 2017,” Microsoft announced.
Microsoft CEO Satya Nadella had previously said: “We are focusing our phone efforts where we have differentiation – with enterprises that value security, manageability and our Continuum capability, and consumers who value the same. We will continue to innovate across devices and on our cloud services across all mobile platforms.”
Microsoft’s strategy does not appear to be about putting Windows everywhere. With the continued shutting down of its smartphone business and the $350m sale in May of its feature phone business, the company is shifting emphasis to cloud-based software, and, surprisingly, its Surface PC hybrid device.
The company’s annual report for the 2016 financial year (which ended on 30 June) showed that Office systems revenue has remained steady over the past three years – $23.5bn to $24.3bn – while Surface revenue shot up from $1.9bn in 2014 to $4.1bn in 2016.
The job cuts come at a time when the Windows 10 free upgrade offer for consumers ends. From the beginning of August, people wishing to upgrade Windows will need to buy the desktop operating system.
The company’s 2016 annual statement revealed that Windows revenue arising from direct customer sales was $8.1bn in the 2016 financial year, compared with $14.8 bn in the 2015 financial year.
Microsoft said: “Our ambition for Windows 10 is to broaden our economic opportunity through three key levers: an original equipment manufacturer ecosystem that creates exciting new hardware designs for Windows 10; our own commitment to the health and profitability of our first-party premium device portfolio; and monetisation opportunities such as services, subscriptions, gaming, and search advertising.”
According to the IT community site Spiceworks, as of 30 June 2016, 38% of organisations across the globe had adopted Windows 10. Of those, most (58%) had implemented while the rest (42%) were still testing.
A survey from systems management company Adaptiva reported that 63% of enterprises (with 10,000+ seats) plan to wait at least six months to upgrade to version 10.
On 2 August Microsoft plans to roll out a major update to Windows 10. The update expands the Windows Hello authentication system to the company’s Edge browser. Microsoft said compatible websites could use Windows Hello to authenticate users from their biometric data.
From an enterprise perspective Microsoft has also added Windows Information Protection, formerly referred to as enterprise data protection. Windows Information Protection is designed to enable businesses to separate personal and organisational data and helps protect corporate data.
Adaptiva’s survey found that 39% of those working in large enterprises (30,000+ seats) believed the 2 August Windows update would encourage them to migrate sooner.
Read more about Microsoft’s strategy
- Big job losses in Finland as Nadella has a rethink on Windows phones.
- Software giant Microsoft announces a range of new Windows 10 devices, including smartphones, a tablet – and Surface Book, the company's first laptop device.
In June 2015, Microsoft announced a change in organisational structure around its strategic direction as a productivity and platform company. As part of this change it is placing big bets on cloud computing.
The company’s newly formed Intelligent Cloud business comprises existing public, private and hybrid server products and cloud services. It includes Microsoft SQL Server, Windows Server, Visual Studio, System Center and Azure, together with Premier Support Services and Microsoft Consulting Services.
This means that on-premise server products and Azure are all treated as part of the company’s Intelligent Cloud business.
This business reported revenue of $25bn in the 2016 financial year, a slight rise from the 2015 financial year revenue of $26,430.
Microsoft claimed the Intelligent Cloud product portfolio makes it the only company with a public, private and hybrid cloud platform that can power modern business. In its 2016 annual report, the company declared: “We are working to enhance the return on IT investment by enabling enterprises to combine their existing datacentres and our public cloud into a single cohesive infrastructure. Businesses can deploy applications in their own datacentre, a partner’s datacentre, or in our datacentres with common security, management and administration across all environments, with the flexibility and scale they want.”
Canalys research analyst Daniel Liu said: “Not every organisation and every workload will migrate to the cloud. Cost is a major issue, but also compliance and regulations, security concerns and application readiness are determining factors in cloud migration strategies. The adoption of hybrid cloud and on-premises solutions is prevalent as organisations seek to get the best of both worlds.”