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Microsoft Cuts 7,800 Jobs In Its Ailing Smartphone Business

ROBERT SIEGEL, HOST:

Microsoft is cutting up to 7,800 jobs. That's nearly 7 percent of its workforce, and it's mostly from the company's smartphone business. NPR's Aarti Shahani reports.

AARTI SHAHANI, BYLINE: Microsoft bought Nokia, the phone maker, for $9.5 billion in 2014. Now Microsoft says it'll take a write-down of 7.6 billion related to that purchase. And the big job cuts will come primarily from the phone division.

AL HILWA: The strategy of record at the time was to go big in the hardware business and imitate Apple.

SHAHANI: Al Hilwa is an analyst with IDC.

HILWA: In retrospect, yeah, that did prove to be a mistake.

SHAHANI: Microsoft realized it couldn't make high-end luxury phones to compete with iPhones, and it couldn't beat out low-end phones, the ones under a hundred bucks. According to IDC, in the first quarter of this year, Microsoft-Nokia had just 2.6 percent share of the global smartphone market, ranking number nine overall. All that said...

HILWA: They're not really getting out of the phone business as much as they are focusing on a platform for the phone that is very much a continuation of their PC business.

SHAHANI: Microsoft isn't ditching hardware. In a statement today, CEO Satya Nadella says the company is changing strategies - less focus on growing a standalone phone business, more focus on growing the Windows ecosystem - getting Microsoft Office and Xbox to work more devices better. The big question is whether this news of layoffs and downsizing will have a chilling effect on partnerships. Frank Gillett, an analyst with Forrester Research, says Microsoft needs other phone makers, like Samsung and LG, to choose to use Windows instead of Google's Android operating system. And Microsoft needs independent developers to be invested in Windows and work on apps that make it a fun, rich environment.

FRANK GILLETT: The balancing act that Microsoft will have to do now is reassure developers, hey, we're still in this even though we made these dramatic job cuts.

SHAHANI: Microsoft expects to complete most of the layoffs by the end of this year. Aarti Shahani, NPR News. Transcript provided by NPR, Copyright NPR.

Aarti Shahani is a correspondent for NPR. Based in Silicon Valley, she covers the biggest companies on earth. She is also an author. Her first book, Here We Are: American Dreams, American Nightmares (out Oct. 1, 2019), is about the extreme ups and downs her family encountered as immigrants in the U.S. Before journalism, Shahani was a community organizer in her native New York City, helping prisoners and families facing deportation. Even if it looks like she keeps changing careers, she's always doing the same thing: telling stories that matter.

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