An internal memo from Microsoft’s CEO Satya Nadella promises tough choices are coming soon. What those choices will be is unclear but Nadella previously stated to struggle with the Nokia inheritance from Microsoft’s previous CEO Steve Ballmer.
In a memo to the Securities and Exchange Commission (SEC) earlier this year Nadella already spoke about a possible write-off of the Nokia purchase. This internal memo has been published by The Register. Microsoft’s new fiscal year starts next week and in anticipation of that Nadella already said goodbye to Stephen Elop who came from Nokia and led Microsoft’s phone business.
In the same memo, cited by The Register, Nadella also states that, “phone hardware did not meet its sales volume and revenue goals, and the mix of units sold had lower margins than planned.”
The memo also reveals that Microsoft’s costs and revenues on its Lumia phones were about the same, $1.4 billion. In the end, the phone hardware unit made $4m in losses on gross margin.
Microsoft has sold a lot less phones (8.6 million) in the third quarter of its fiscal year than its partners that sell Windows Phone phones by their own brand name (24.7 million) and compete with Microsoft’s Lumia phones.
Combined that’s also still a lot less than the 255 million Android phones sold in the same timeframe. Microsoft acquired Nokia for $7.2 billion.