Microsoft Corp.’s Satya Nadella unveiled his first vision statement as CEO, saying that more engineering and organizational changes are needed as he attempts to turn around the software maker.
Nadella’s memo didn’t address the prospect of layoffs, yet people familiar with his thinking said reductions will probably happen.
Based in Redmond, Wash., Microsoft (Nasdaq: MSFT) is shifting its focus from the devices and services strategy that former CEO Steve Ballmer reorganized the company around last July and is honing in more on productivity, mobile and cloud, Nadella wrote in the memo Thursday that was distributed to employees and posted on the company’s website.
“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 the most comprehensive statement from Nadella 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 such as Apple Inc.’s (Nasdaq: AAPL) iOS and Google Inc.’s (Nasdaq: GOOG) Android and has shuffled management in areas including 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 Thursday about Nadella’s memo.
When Microsoft agreed to acquire Nokia Corp.’s (NYSE: NOK) handset business in September, the software maker pledged $600 million in annual cost savings for 18 months after the deal closes.
Meeting that commitment will probably 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.
Nadella also defined productivity as corporate and consumer activities. He said he sees the company’s operating systems as a cloud OS made up of of Azure, its software for hosting and running apps in the cloud; its Windows software for PCs; and Windows for devices and Microsoft’s own hardware.
He pledged to modernize the company’s engineering processes to be faster and rely more on data, as well as better at predicting what customers want.
Nadella 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. “The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming.”
Microsoft will report fiscal fourth quarter earnings on July 22.
“I’ll say more then on what we are doing in FY15 to focus on our core,” Nadella wrote.