Deconstructing Satya. Episode II. The Empire Strikes Back.

Last week before the news broke, I warned Microsoft employees, all of them, to “get to work on your resume.” Change was coming, major change, and that always always always begins with a bloodletting.

Indeed, as others were decrying the word count of Satya Nadella’s “bold ambition” manifesto — signifying nothing, given it took Steve Jobs 1700 words to tell us he wasn’t going to use Flash on the iPhone — I read each word, every sentence. Nadella’s near-term intentions were obvious.

What was not clear, however, not until now, is how deeply divisive the Nokia purchase remains within the corridors of Microsoft’s ruling elite.  

This Deal Is Getting Worse All The Time

Despite the corporate-speak, despite the strategic shift toward “productivity and platforms,” Nadella’s manifesto message last week was undeniable. Job cuts. Thus, I wrote:

“Big layoffs by Christmas.”

But Nadella kept hinting, so I followed that with…

“Big layoffs by Thanksgiving.”

But Nadella hinted further, so I followed that with…

“Big layoffs by Labor Day.” 

In fact, the big cuts came only a few days later. Points for swift action, I suppose.

Nadella’s willingness to act fast, to re-make Microsoft, hack away at the extraneous and transform the company into “the productivity and platform company for the mobile-first and cloud-first world” appears to be exactly what the company needs.

But when you gut a $7.2 billion acquisition, which the company only closed on this past April, and fire 18,000 people, then you haven’t leapt from a burning platform, you’ve set the platform ablaze. There is no going back, no do-overs for Mr. Nadella. He is about to set the company on a ten year course, possibly longer, and though Microsoft possesses a rather stunning array of assets, what’s most stunning is the company still has virtually zero response to the iPhone, the iPad and Android. In 2014.

Competing in a mobile-first, cloud-first world — with no mobile device the world actually wants — seems less like corporate bumbling at this point and more like French royalty certain the barbarians will forever remain outside the gate.

Sadly, more than 18,000 will soon join those barbarians.

That Was Never A Condition Of Our Agreement

Nadella’s follow-up email to staff announcing major cuts is mercifully shorter than his bold ambition manifesto, though similarly riddled with the kind of corporate-speak analysts with expense accounts use on marketing managers with a too large budget.

My thoughts on Nadella’s latest message are below, in bold italic.

From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT

5am! Leading is hard. 

Subject: Starting to Evolve Our Organization and Culture

“Starting to Evolve.” Catch that? This is just the start.

Last week in my email to you I synthesized our strategic direction as a productivity and platform company.

And now I’m gonna need those TPS reports.

Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

This reads like a draft memo from the assistant to the regional manager. No excuses here. 

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.

Nokia is dead. Godspeed all you Nokians. 

Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers.


In his “bold ambition” email to employees, only days before this, Nadella stated “first party hardware” would form part of the core Microsoft vision. He said this four times! 

    1. Our cloud OS infrastructure, device OS and first-party hardware will all build around this core focus and enable broad ecosystems.
    2. Our Windows device OS and first-party hardware will set the bar for productivity experiences.
    3. Our first-party devices will light up digital work and life.
    4. We will build first-party hardware to stimulate more demand for the entire Windows ecosystem.

[emphasis added]

Now, days later, he guts Nokia, kills off the very popular Asha hybrid phone line and halts development of the AOSP-led Nokia X.  

I suspect Mr. Nadella believes the smartphone wars are lost, despite whatever else the company may tell us. They are no longer worth fighting for. 

Prediction: Microsoft will focus its mobile hardware efforts not on Windows Phone but on Surface, on new mobile gaming devices, and new mobile “productivity” devices; anything and everything that might help them uncover that next great mobile computing inflection point. Smartphones are lost to them. 

We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.

13,000 from the 18,000? 12,500 from Nokia plus 500 from elsewhere? Where does this number come from?

Nadella needs to be straightforward here. So far, he’s failed. 

It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas.

Nowhere near 18,000, however. Thus, it would be best if not said at all.

My promise to you is that we will go through this process in the most thoughtful and transparent way possible.

Your own email appears poorly thought out and lacking transparency!

We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Forget them. Move forward. 

Later today your Senior Leadership Team member will share more on what to expect in your organization.

How bureaucratic is this company?

Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

That’s three, maybe four outcomes, not two. Can Nadella really not trust anyone to review and edit his emails? 

Fact: Nearly every single Nokia device over the next several years will be replaced by an Android, perhaps a few by iPhones, not Windows Phone (in any form).  

My prediction that the remaining “Nokia” employees will focus mostly on new mobile productivity devices and new mobile gaming devices, not smartphones, stands. Nadella just isn’t ready to tell us this, not yet. Perhaps, he’s not come to terms with it himself. 

First, we will simplify the way we work to drive greater accountability, become more agile and move faster.

Perhaps given your size, strengths and history, being inflexible and moving slower, and with less accountability (e.g. investor input), would be the best strategy?

Yes, I am serious. Agility and speed are never the strengths of behemoths. 

Perhaps You Think You Are Being Treated Unfairly

As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers.

Sideways layers of management? Sideways layers!  

In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft.

Question: How dysfunctional is this company?

These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Answer: Appreciably dysfunctional. 

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. 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.

Integrate Nokia into Microsoft? Realize the synergies committed to last September? Align the first party phone portfolio to Microsoft’s strategic direction? To win the higher price tiers? Which builds on Microsoft’s success in the affordable smartphone space?

We can’t possibly divine what these words mean because Nadella does not know the way forward in mobile. That’s a problem. 

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.


It Is Your Destiny

Last week, I praised Nadella for his bold, borderline revolutionary statements. A few days later he morphs into a parody of his predecessor.

I give him a pass. This time.

When it comes to massive corporate downsizing, we always say there’s a right way to do these things but there’s never a right way to do these things. That said, it seems clear Nadella hasn’t yet figured out exactly what Microsoft should do in mobile and that’s a problem for which no one will give him a pass.

Published by

Brian S Hall

Brian S Hall writes about mobile devices, crowdsourced entertainment, and the integration of cars and computers. His work has been published with Macworld, CNBC, Wall Street Journal, ReadWrite and numerous others. Multiple columns have been cited as "must reads" by AllThingsD and Re/Code and he has been blacklisted by some of the top editors in the industry. Brian has been a guest on several radio programs and podcasts.

39 thoughts on “Deconstructing Satya. Episode II. The Empire Strikes Back.”

  1. “all employees impacted by these changes,”

    I almost aways hate it when people use the word “impact” for “affect”. Somehow, it seems appropriate here. I have no doubt these employees will feel like they were hit with something.


  2. 1) Nadella voted against the acquisition of Nokia.

    2) Nadella recanted. A wise political move that landed him the CEO position.

    3) A man convinced against his will is of the same opinion still. Nadella is STILL against the Nokia acquisition, but now its a done deal.

    4) Nadella isis unraveling the Nokia purchase as quickly as he can. it drives me crazy that he does everything half-way, but he’s a company man and his hands may be tied. Still, it’s lousy strategy.

    5) Look for more of the same. Nadella knows where he wants to go. But it’s clear that he lacks the ability to communicate that vision. And it’s also clear that he lacks the ruthlessness to cut ties with the past — he prefers to untie rather than to cut.

    6) I think that Nadella is good for Microsoft. However, as fast as he’s moved, he still hasn’t emerged from Steve Ballmer’s enormous shadow.

    1. Ballmer was there almost from the beginning, then was CEO for a decade. It will take time. I do think Nadella is probably the best person to run Microsoft but it does appear to have a culture that eats itself.

    2. What about . . .

      7) Nadella is but one Captain at the helm of a ship cantering off in all directions, in blinding fog.

      A good strategy does more than urge the forces forward toward a goal or vision; it honestly acknowledges the challenges to be faced AND provides an approach to overcoming them.

      But I suspect you are correct in that his hands may be tied. Maybe he needs to set the record straight. It certainly is not in MS interest to have to be on the hunt for a new emperor.

      A rude saying that may be poignant: “Balls” said the Queen; “If I had them I’d be King.” Nadella should take a chance and step up to that plate. IF he is the best man for the job, he should have no fear. I doubt Bill wants the job and certainly had some say in Nadella’s hiring and Ballmer’s firing.

  3. Beside the fact that this “tech opinion” is heavily biased, have you heard that MS actually acquired 30K people recently?

      1. They are most probably the same people. But my comment wasn’t about that, I was referring to the doom and gloom view from the article, which is totally inaccurate

        1. Of course if those 18k being let go (mostly Nokia, as I understand it) are part of the 30k just hired, that won’t make being let go any easier. Which makes the Nokia purchase even more confusing.

          I don’t agree with doom and gloom, either. I have no doubt that MS will be around for quite some time. The question is, in what form, particularly in regards to mobile? I don’t think this article communicates that total doom and gloom. But that MS has missed the mobile boat and that this is causing great upheaval within MS at pretty much every level is hard to deny, based on MS actions. Unless you contend Satya is throwing up smoke screens.


          1. But Joe, can MS afford (future) not to be in the heart of mobile? Wouldn’t that be like motoring without a wheel?

          2. That’s the multi-billion dollar question, right? They don’t have any where near the luxury of time that they had competing with Netscape, nor are they competing with companies as clueless. I think the most they can hope for currently is to just stay on the radar.


          3. Mobile is not everything. It’s “nice to have”, sure, big money right now. But it’s not the end of the world, there are other industries to make money from.

          1. I believe Microsoft is doing well with their cloud-related products. But they are dead in mobile, they messed up their flagship OS, Windows Phone sells very poorly and the purchase of Nokia was a terrible error. As a company they have been mired in serious confusion for the last 3 years, and I’m not convinced they’ll do any better under Nadella than they did under Ballmer.

  4. No Brian, you were right…
    There will be layoffs: more – by Labour Day, and Thanksgiving, and Christmas…. and…
    Once they start this dynamic, there won’t be any stopping it – it will eat them alive.
    Because they will cut and cut and cut, trying to save the company, but will never cut the things that might have made a difference – because it is intrinsic in who they are as a culture and company.
    They believe who they are, and what they do, is big and important and good.
    But like the back side of a wave, they can never outrun the back-suction. It will follow relentlessly wherever they go until it sucks them to death.
    I would buy Excel and Word: if I could buy them unbundled, cross-compatible, and full featured (& without the stupid ribbon in Word) – and for half the price. That would offer utility within my ecosystem.
    But they want me to buy what they offer, not what I want.
    And they will continue to offer me what they want – not what I want.
    No one asked for subscription (rental) software. It’s what they want, for their own selfish interests.
    But I don’t have to buy their products, and simply won’t, unless and until, it is attractive – to me.
    Not attractive to their Corporate bean counters, or their internal bureaucratic empires, but me…
    That is where Microsoft is stuck and impaled. Their real clients are their own internal fiefdoms (and Satya’s memo proved it). So the cuts will be applied to the least ingrained and protected of their own first, then when that fails to serve, will roll on and on taking down one division after another in a cannibalistic orgy.
    Satya was an internal appointment – therefore he is a political appointment. And the purpose of politics is to keep things the same, maintain the status quo – not to change anything.
    So in the end, Satya will be the man who could not see (what needed to be done), because he has a personal interest in not seeing. Like Ballmer before him.

      1. Yep. That is a great quote and is a prefect example of Microsoft arrogance that is going to cost them dearly. It is also a good example of Microsoft over-serving the market and not offering the choices that consumers want. This is why you will see free office suites such as Google Docs and LibreOffice and iWork start to take off as consumers are much more smart about their purchasing decisions that many IT shops.

          1. Yep. You do. John Kirk is one of the people who gets what is going on with Microsoft and how to fix it.

    1. “because it is intrinsic in who they are as a culture and company”

      One thing I have recently learned, it is nigh on impossible to solve cultural issues structurally.


  5. Given the described sense of inertia in Microsoft, it might be better if they collapsed the current businesses to a sensible operating core and pursued new business directions with independent fully owned subsidiaries. These subsidiaries would have their cultures and work distinctly on their own. For me synergy is another word for “I will be your albatross, while I will continue to do things my way!” To my mind “continuity” in Apple are meaningful points of interaction and operability not some fuzzy “synergetic” whatever.

    1. You are correct Mark. Many have said that Microsoft should have been broken up in to 2 to 3 businesses as what they are currently doing just does not make sense and is leading to their downfall.

      How can you sell Windows to PC OEM’s and at the same time make the Surface Pro 3? The answer is you can not for long because every sale of a Surface Pro 3 takes away a sale from a PC OEM’s offering.

      How can you try and protect the sky high pricing for Microsoft Office plus make Microsoft Office work best on any platform? The answer is you can not. For a long time Microsoft Office has over served the market as many users do not need to use most features that it offers. Also, offering a subscription only model for Microsoft Office on the iPad is just dumb. While I am sure they will get some people to sign up and use it most people want to own their software. Plus, unlike Adobe’s software suite where it makes sense to be on a subscription as new cameras come online and so therefore you need updated camera RAW support. This is not the case with office software. Not only are the alternatives caught up in some places they have surpassed what Microsoft is offering.

      Had Microsoft spun off the Office software to a separate company they could concentrate on making it run best on all platforms and not worry about how it would affect sales of Microsoft Windows licenses.

      Time will tell if they are able to see the root causes of their problems and make the corrections that they heed do.

      1. Many have said that Microsoft should have been broken up in to 2 to 3 businesses as what they are currently doing just does not make sense and is leading to their downfall.

        Makes one wonder where Microsoft would be if they were broken up as part of a settlement in their antitrust lawsuit 10+ years ago.

        1. Yes. It does make you wonder. In fact I do think that history will show that had they been broken up as part of the antitrust lawsuit they would be a lot better off now and in the future.

  6. Brian, I agree with you that MS is better off to focus on “uncovering that next great mobile computing inflection point.” But I think there’s a simpler explanation for most of this memo.

    MS will continue to make first-party Windows Phone-based smartphones. They will get rid of all other Nokia phones (Asha, Series 40, AOSP), and thus get rid of the now unneeded Nokia staff. The remaining staff will focus on affordable (as before) but also high-end WP-based Lumia smartphones by more quickly incorporating “breakthrough innovation” in hardware (cameras?) and services (Cortana, other MS cloud services).

    1. Thanks. That was my first assumption, and I don’t want to imply they will kill off Windows Phone. But, as I re-read his words (a thankless job), it seems that Nadella now convinced that the *smartphone* wars are lost. However, the world keeps changing and new forms of mobile computing will/may appear. Nadella hopes Microsoft can be relevant there. My take and I’m sticking to it.

      1. PC revolution lasted, what, 25 years? I would not expect a new computing revolution to come so soon after iOS. There will be refinements of the hardware, better designed interfaces for apps to take advantage of the touch screen, but a revolutionary new concept, large enough to dwarf smartphones and tablets may not come around for a very very long time.

  7. Nadella should channel his inner Bill Gates and just blatantly rip off Apple’s innovations with Continuity. They could scale Windows back to a more conventional desktop mode for PCs, while preserving productivity on Windows tablets designed to be used with touch input. Fortune 500 CTOs would cheer the change, and OEMs would have a clear direction on what to manufacture.

  8. The smartphone war is over. Microsoft would do better to focus on what comes next. Yep, it’s going to sting for a few years, but it beats dumping resources into a lost cause when they could be searching for what’s next. Maybe it’s something like the Surface or maybe not. But today, those of us who have moved on to other platform are not giving any money to Microsoft. Wouldn’t Microsoft be better off building software and services on Android, iOS, and Mac that are best of breed? No, they might not collect $350 for Office, but they might collect $75/year for a number of small services we begin to rely on.

  9. Makes me feel how difficult is it to change the vision of company when it has become big, being an enterprise focused to consumer, this shift can be huge. With so many people involved, share holders etc it appears to be a daunting task.

    As you noted he morphed, it is because lot of people in Microsoft don’t want to change the vision. Particularly leadership team.

    You emphasised : Senior Leadership Team member will share more on what to expect in your organization. It means it’s the leadership team which drives the company, not Satya Nadella.

    You have also noted no of times that Brand name Windows has itself become a problem. I think if they are shifting gears they need a new brand or may be a new company or may be Microsoft is doomed forever. For how long you are going to change the body of an old engine?

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