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Fears mount over Microsoft job losses

Publication Date : 19-07-2014

 

Microsoft Corp's biggest workforce reduction in company history could cost China more than 1,000 jobs, analysts warned on Friday.

They also fear new CEO Satya Nadella's massive downsizing plan - which will focus on the device-making segment - may not work well in China, the world's largest smartphone producer and buyer.

Microsoft announced on Thursday plans to lay off as many as 18,000 employees globally in the next year as it tries to absorb the handset group recently acquired from Nokia Oyj and squeeze operating costs in other units.

The United States software giant refused to discuss reduction plans for China.

Charlie Dai, principal consulting analyst at consultancy firm Forrester Research Inc, said Microsoft might eliminate at least 1,000 jobs in the country, including research, marketing and sales.

"The development team Microsoft inherited from Nokia in China is not its core asset. Every segment that is not close to the company's cloud strategy can be treated as legitimate slim-down target at this moment," said Dai.

Stephen Elop, former Nokia CEO who currently heads Microsoft's devices group, said in an open letter that the company planned to reduce its engineering team in Beijing. The team will have "supporting roles including affordable devices".

Elop also said Microsoft was moving major smartphone production to Hanoi, leaving "some" production in Beijing and Dongguan in southern China.

"My colleagues and I are extremely upset about the upcoming job cuts," said a Microsoft employee under the condition of anonymity.

"Rumours are going around now. Many say hundreds will be axed while some versions have a far bigger number," the employee said.

Analysts argued cutting loose with China in smartphone design and manufacturing does not benefit Microsoft, as it aims to become a mobile company similar to Google Inc.

"China is the biggest phone market in the world, it is important to understand the local requirements for Microsoft's future product development," said Kitty Fok, managing director of research company IDC China.

Another factor for Microsoft to consider in keeping research and production in China is a recent government decision to support local integrated circuit providers, Fok said. Integrated circuit making is a critical upstream industry for smartphones.

China shipped 220 million mobile phones in the first half of this year, with overseas brands taking around one-third of the market share, according to data from the China Academy of Telecommunication Research and Beijing company Analysys International.

Samsung Electronics Co and Apple Inc are the major foreign-brand smartphone vendors in the country while Micosoft's Nokia accounts only about 3 per cent of the market.

Nicole Peng, research director of Canalys China in Shanghai said the operation workforce of Nokia in China was already very lean after job cuts in 2012. The exact number of jobs lost is unknown because the company does not break down the figure by region.

"The decision to axe Nokia X and Android-based phone teams would have significant impact over Microsoft's device strategy in China," Peng said.

Smartphones powered by Windows operating systems are not popular in China. More than 90 per cent of the devices sold in the nation are installed with Android or iOS operating systems, according to the China Academy of Telecommunication Research.

Analysts agreed employees in Microsoft China's cloud service and Xbox gaming console are most likely to survive the layoff while staff members in traditional businesses could be cut.

"I think the Finland operation will take the hardest hit globally and the Chinese teams in charge of feature phone and Android phone projects are mostly likely to be cut," said Peng.

 

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