What You Should Know About Satya Nadella’s Microsoft

By Don Reisinger

By laying off 7,800 people, Nadella may not be doing the popular thing, but he is doing what Microsoft needs right now. The company has not, and never will be, a mobile handset maker. When Microsoft announced that it was acquiring Nokia, its decision was a shock and mystery. Now, Nadella is confirming what the rest of the world already knows: Microsoft is not in the business of making smartphones.

One thing Nadella seems to have no issue trampling, however, is Steve Ballmer’s legacy. Although he has never publicly commented on his predecessor’s mistakes, he has tried to right the many wrongs. Nadella has converted Microsoft to a cloud company, written off the Nokia deal, and fired some of Ballmer’s top lieutenants. Nadella is saying, in his own way, that Steve Ballmer didn’t cut it as a CEO in his last few years in the job.

Although Nadella’s decision to lay off 7,800 people suggests his company is moving away from a mobile track, that’s only partly the case. Microsoft is still committed to Windows Phone and being a “mobile-first” company. The layoffs suggest that Microsoft is simply only looking to get out of building devices and spending the significant cash it takes to be successful in that market.

In a statement on July 8, Nadella didn’t explicitly say that smartphone production is dead at Microsoft, but he came close. He said that “in the near term,” he’ll provide a “focused phone portfolio,” but over time, he’s planning for a “reinvention in mobility.” The statement is part of a broader tale: Microsoft is still all about software and services. Whether it’s Windows, Azure or Office 365, Microsoft’s future is all about software and services and not hardware in any market, let alone mobile.

The cloud is a critical component in the Satya Nadella-run Microsoft. Every chance he gets, Nadella says that his company is a “mobile-first, cloud-first” firm that wants to reinvent both markets. There’s no reason, based on Nadella’s recent moves, to suggest he’s stepping away from the cloud. Quite the contrary, Microsoft’s future may rest solely in its ability to appeal to cloud customers.

Following that, it’s worth noting that while Windows 10 is very important to the future of Microsoft, it’s not nearly as important as it once was. Years ago, Windows was the be-all, end-all to Microsoft. Now, it’s just a software platform that’s a vehicle for the company to peddle its cloud services. Look for Windows 10 to take a backseat to all of Microsoft’s initiatives in the cloud.

If the layoffs and Nadella’s recent comments about Microsoft’s future say anything, it’s that the Microsoft CEO does not see his company as another Apple, making hardware and controlling the software experience from cradle to grave. Quite the contrary, Nadella wants to run a platform-agnostic company that services users across operating systems. That’s quite un-Apple-like and shows again that the iPhone maker is becoming less and less a competitor in Nadella’s eyes.

Microsoft’s enterprise focus is more laser-like than ever. The company’s many moves and decision to pivot on Windows 10 and make it a free upgrade while retaining some of the top features in Windows 7 was a tip-of-the-hat to the enterprise. Nadella has also touted his company’s plans for bring-your-own-device (BYOD) initiatives and building out CRM systems. The enterprise, Nadella seems to believe, is critical to his company’s future.

Microsoft isn’t giving up on Bing, as evidenced by the company’s recently announced partnership to run AOL’s search and ad services and the service’s integration into Windows 10. Nadella’s focus has been on mobile and the cloud and not about competing with Google on search and ads and operating systems. Unlike Ballmer, who saw Google as a major threat, Nadella seems to believe that the search giant is only of marginal concern.

Nadella hasn’t talked much about PC makers since he became CEO, but that doesn’t mean he believes they’re unimportant. Quite the contrary, Microsoft has made every concession necessary to keep its PC partners happy and keep them churning out Windows devices. With Windows 10, Microsoft is expected to enhance its partnerships with third-party PC makers, realizing all too well that when customers buy hardware with its software on it, Microsoft can pitch its cloud services down the pipeline. PC makers hold far more clout in Redmond than one may think.