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Microsoft streamlines its phone division, focuses on fewer smartphones

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Microsoft cuts 7800 jobs, focuses on flagships, value and business phones

Earlier today, Microsoft announced a major reorganization of its smartphone business, which includes a write-down of $7.6 billion related to the Nokia acquisition in 2014 and another wave of layoffs, again mostly from the former Nokia mobile division.

But amidst all negative feelings there are some good news for all true Windows Phone fans. First, Microsoft has made it clear that the phone business will remain an important part of their cloud first / mobile first strategy (at least for short term) and the company is committed to a streamlined line-up of first party devices. Second, Redmond will reduce the number of new Lumia devices released each year, and we will have a more focused line-up.

Microsoft CEO Satya Nadella writes:

“In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group. We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software.

He also says thatWe’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.

The three segments are: value phones, business phones and flagship phones.

People familiar with Microsoft’s short term plans explain that the company remains very committed to the platform by releasing fewer, but better smartphones, and by supporting hardware partners to develop Windows 10 smartphones.

We can expect Microsoft to dramatically reduce the number of new models and focus on developing smartphones with unique offerings to a narrower set of customers, rather than continuing the current strategy of flooding the market with similar low-end models. There will be around 6 phones per year in all three segments. Two of these phones will be flagships, two – suitable for business users, and two value phones suitable for first time smartphone users.

Microsoft will also reconsider its relationships with carriers and may even exit markets where sales are very weak. Carrier exclusivity agreements may be terminated and the upcoming smartphones may be launched simultaneously in many markets.