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Microsoft plans to cut 1,850 jobs as it pulls out of consumer smartphones

Leaked memo shows Microsoft wants to hang on in mobile, but focus on business devices

25 May 2016

Microsoft is pulling out of consumer smartphones, according to a leaked memo.

After buying Nokia's handset business for $7.2 billion two years ago, Microsoft wrote it off for $7.6 billion last year, slashing jobs. Last week it spun out the division, as its market share slid to one per cent.

This dire result has lead to the latest round of 1,850 job cuts and a $950 million writedown.

CEO Satya Nadella said the unit would be "streamlined", and would continue work on Windows 10 Mobile, but would not say whether it would continue to make hardware.

"We are focusing our phone efforts where we have differentiation," said Nadella in a statement."We will continue to innovate across devices and on our cloud services across all mobile platforms."

Microsoft kept that vague attitude in a leaked memo that said it was not fully pulling out of smartphones."We're scaling back, but we're not out!" said Terry Myerson, Microsoft's head of Windows and devices, in a memo seen by Re/code.

Myerson pointed to the Surface and Xbox giving Microsoft 300 million "active devices", but admitted that success had not followed in consumer smartphones.

"Yet our phone success has been limited to companies valuing our commitment to security, manageability, and Continuum, and with consumers who value the same," he added. "Thus, we need to be more focused in our phone hardware efforts."

That suggests a focus on business smartphones may continue, perhaps made by third-party manufacturers, as well as on making mobile apps and services for Android and iOS.

But while Myerson suggested the company wants to work with developers to create more devices, it isworth noting that Gartner's latest round of stats reveal 2.4 million Windows phone shipped between January and March - and the vast majority, 2.3 million, were direct from Microsoft. That suggests third-party manufacturers sold virtually no handsets.

Regardless of whether Microsoft does hammer the final nail in the coffin of Nokia and exit the hardware market completely, it intends to stick with software and develop apps and services for rival platforms.

"Our company will be pragmatic and embrace other mobile platforms with our productivity services, device management services, and development tools - regardless of a person's phone choice, we want everyone to be able to experience what Microsoft has to offer them," Myerson said.

For those who did buy Microsoft phones, Myerson said support would continue. "We will continue to update and support our current Lumia and OEM partner phones, and develop great new devices," he wrote.