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Nadella leaves no doubt about who is in charge in first six months as CEO

Juan Carlos Perez | Aug. 8, 2014
He's had his share of hits and misses but he's made his presence felt from the start

Mixed reviews on the layoffs, Nokia deal and hardware strategy
Forrester's Johnson gives Nadella low marks for the way he articulated the need for the layoffs in the memo he sent to employees. "It was full of management-speak instead of empathy and humanity. He missed a key opportunity to connect and build trust and support with employees," he said.

The IFRC's Happ is also unimpressed with the process of downsizing and flattening the organization, which he said is understandable but which he found was executed rather arbitrarily. "Some very good people were let go, and with them an exit of important knowledge. It takes longer to be surgical, but ultimately better for the patient," Happ said.

However, Gartner's Adrian says the restructuring isn't just about shrinking the staff. "There has already been significant investment in new positions and people to fill them," Adrian said, adding that the company also appears to be trying to streamline and emphasize a flatter management structure.

Certainly one of the biggest challenges Nadella is dealing with is the integration of the Nokia devices and services business, for which Microsoft paid more than US$7 billion last year.

Most of the layoffs announced in July will come from the Nokia staff that came over with the acquisition, which closed in late April, leading some observers to question whether Nadella is significantly less than enthused about the deal than Ballmer, who brokered it.

In late July, during the fourth-quarter earnings report conference call, Nadella gave further indications that he's not as gung-ho about Microsoft-made hardware devices as his predecessor.

"Our approach to first-party hardware going forward is clear: At times we'll develop new categories like we did with Surface. And we will responsibly make the market for Windows Phone," he said then. "However, we're not in hardware for hardware's sake, and the first-party device portfolio will be aligned to our strategic direction as a productivity and platform company."

An early victim of that more skeptical vision of Microsoft's mission as a hardware maker was a long-rumored smaller Surface tablet, reportedly called Mini, whose development was axed.

Industry analyst Jack Gold from J. Gold Associates interprets the layoffs as a sign that, unlike Ballmer, Nadella doesn't want to remake Microsoft in the Apple model and compete against it directly.

"Nadella rightfully understands that it shouldn't go there," Gold said via email. "Nadella's focus on productivity is the right approach to Microsoft's future in my opinion, including the focus on how to make the OS better, and services in the cloud."

In fact, Gold believes that in the next 18 months, Nadella will exit the phone business, as well as scale back or exit the Surface business.


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