Last week, the technological world was stirred and shaken with the news of Microsoft laying off 18,000 employees in one single stroke. Although 12,500 of those fired employees were from Nokia, the industry has never observed such large scale pink slip distribution ever.
Even during the recession, Microsoft had terminated only 5800 employees.
Along with this sensational news, there was another announcement from Microsoft which has kept the tech observers busy since last few days: Ditching Android handsets.
Satya Nadella said, “In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.”
Earlier this year, Microsoft had launched their first ever Android based smartphones: Nokia X, Nokia X+ and Nokia XL with much fanfare. Few experts had declared this move as a masterstroke, as an attempt to conquer low cost Android smartphone market in developing countries.
But within 5 months, not only the project has been shelved, but all Nokia X series product designs and prototypes would be moved over the Lumia camp.
The following are the three reasons which actually justify this move:
Distraction from the core objective
Microsoft and Nokia were allies long before the acquisition of the later by the former last year. In order to encash the huge popularity of Android OS, Nokia and Microsoft had collaborated to sell Android along with their hardware.
Nokia even included several of Microsoft’s features removing Android’s standard features such as replacing Google Maps with “Here Maps”, Google Drive replaced with One Drive and Skype. Even the home screen of Nokia X series has that distinct Metro feel of Windows.
But the move backfired.
Reception for this new line of hybrid smartphones haven’t been much encouraging as those who were loyalist to Windows found the overall experience incomplete, and those who love Android OS found the experience confusing.
Although small, but the share of Windows based smartphones have been consistent since the last few years, with a marginal increase whenever a new model is launched. Microsoft’s main objective should be to build a loyal fan base of Windows OS powered gadgets, and this inclusion of Nokia X somewhat diluted the focus.
From the point of view of product development and marketing of an ‘idea’, this is the best move by Microsoft in a long time. The returns from this decision would be visible in the longer run.
Developing an eco-system
When Amazon started to gain market share in ecommerce, they thought hard, and realized that if tomorrow another well funded ecommerce player jumps into the market, they will soon lose their customers. When price and service are the criteria based on which majority of customers are doing their online shopping, what can be the major differentiator to ensure non-stop traffic and sales?
They created an eco-system of their own products, so that they not only gain market share, they become the owner of it.
Today, a person can scan the bestselling books on their Kindle platform, purchase it and read it without even opening another browser. Same goes with Apple products as well: you need to buy apps, listen to songs and save it on Apple’s own ecosystem.
If Microsoft wants to surge ahead in the tech gadgets niche, they too need to do the same. In this line of thinking, selling Android powered Nokia X made no sense whatsoever: they were enabling Android’s ecosystem, at their own expense.
It seems someone at Microsoft finally figured that out!
Shareholders are delighted
This graph represents the increase in value of Microsoft’s shares since last 5 days, with the high point as observed on the day this announcement was made official:
Every publicly listed business like that of Microsoft is fueled and powered by shareholders. The decisions related to product launches must match the expectations made by shareholders so that the company continues to function. Microsoft must have consulted and researched their top shareholders to understand their opinions on this issue, and the result is clearly out.
Ever since this news of killing Android smartphones have come, the shares are experiencing tremendous bounce: in fact, it has recorded their 14 year high.
In our view, Microsoft has taken a bold but a very necessary decision to stop selling Android smartphones, and the positive results would be soon seen by all.
Would love to reader’s thoughts on this move from Microsoft, what do you think?
