Nadella wields the axe to tackle Ballmer’s unfocused legacy

Analysis: Microsoft CEO sees future in ‘productivity tools’ in a world shaped by mobile and the cloud

Satya Nadella signaled in a memo last week that big organisational changes were coming soon. Photograph: Alex Wong/Getty Images

Satya Nadella signaled in a memo last week that big organisational changes were coming soon. Photograph: Alex Wong/Getty Images

Fri, Jul 18, 2014, 01:00

Microsoft’s huge job cuts in the businesses it acquired from Nokia raise questions about its plans in the market for mobile devices.

The acquisition, initiated by Steven Ballmer, Microsoft’s previous chief executive, greatly increased the company’s presence in the hardware business, which is outside its traditional expertise.

The deal has been an unpopular one with investors and many people inside Microsoft. Previously, the largest layoffs at the company were in 2009, when about 5,800 people were affected during the recession.

In February, Satya Nadella became its third chief executive as Ballmer stepped down, and founder Bill Gates left his role as chairman and became a technology adviser to Nadella.

Layers of bureaucracy

Microsoft was often criticised for being unfocused during Ballmer’s tenure, and for having a swelling product line and layers of bureaucracy.

“Under the Ballmer era there were many layers of management and a plethora of expensive initiatives being funded that has thus hurt the strategic and financial position the company is in, especially in light of digesting the Nokia acquisition,” said Daniel Ives, an analyst at FBR Capital Markets.

Microsoft has struggled to find the same success in markets such as mobile and internet search that it did with personal computers. The company anticipated the rise of smartphones and tablet computers, but its products failed, and Apple and Samsung now dominate those markets.

Nadella signaled in a memo last week that big organisational changes were coming soon. He sought to define his vision for Microsoft as a maker of productivity tools for a technology landscape shaped by cloud and mobile computing.

“We will increase the fluidity of information and ideas by taking actions to flatten the organisation and develop leaner business processes,” he wrote. “Culture change means we will do things differently.”

Those statements were seen as foreshadowing layoffs and maybe even peeling off some business units. So far, Nadella has not dropped any major products or businesses. Still, investors have welcomed his overtures. Shares have steadily risen since February, and added more than 5 per cent in the last week as rumors swirled about the layoffs. – (New York Times service)