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Microsoft CEO shares plan for turnaround

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By Bloomberg News
Friday, July 11, 2014, 12:01 a.m.
 

Microsoft Corp.'s Satya Nadella gave his first vision statement as chief executive officer, saying that more engineering and organizational changes are needed as he attempts to turn around the software maker.

“We've got to back it up with products people love, and that's what we're galvanizing to do,” Nadella said in an interview.

The CEO didn't address the prospect of job cuts, yet people familiar with the company's plans said reductions probably will happen. Redmond, Wash.-based Microsoft is shifting its focus from the devices and services strategy that former CEO Steve Ballmer reorganized the company around last July and is homing in on productivity, mobile and cloud computing, Nadella wrote in the memo that was distributed to employees and posted on the company's website on Thursday.

“Over the course of July, the senior leadership team and I will share more on the engineering and organization changes we believe are needed,” Nadella wrote. “Nothing is off the table in how we think about shifting our culture.”

The memo is Nadella's most comprehensive statement about Microsoft's direction since he was appointed CEO in February. Since then, he has made several appearances at company and technology events to discuss the priorities of mobile and cloud products, as he works to shift Microsoft away from its longtime core business of software for personal computers. Nadella has signaled a desire to produce software for rival operating systems like Apple Inc.'s iOS and Google Inc.'s Android, and has shuffled management in areas such as marketing, business development and the Xbox game console.

“We believe management is effectively laying the groundwork for a healthy fiscal year 2015,” Daniel Ives, an analyst at FBR Capital Markets, wrote in a note to its clients about Nadella's memo.

When Microsoft agreed to acquire Nokia Corp.'s handset business in September, the software maker pledged $600 million in annual cost savings for 18 months after the deal closes. Meeting that commitment probably will involve job cuts in areas where the two companies overlap, said the people familiar with Nadella's thinking, who asked not to be identified because the discussions are private.

Other job cuts may result from changes Nadella is making to the engineering organization, the people said. Engineering teams have traditionally been split between program managers, developers and testers. Yet with new cloud methods of building software, it often makes sense to have the developers test and fix bugs instead of a separate team of testers, Nadella said in the interview. He is elevating designers and data scientists to be on par with the engineering team on each product, he said.

Nadella declined to say whether the changes will result in job cuts and said he would provide more details on the implications of his memo when Microsoft reports fiscal fourth-quarter earnings on July 22.

Nadella also stated his commitment to Xbox, even as he listed it as something outside the company's core.

“It's critical to define the core, but it's important to make smart choices on other businesses in which we can have fundamental impact and success,” Nadella wrote in the memo. “The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming.”

 

 
 


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