Microsoft Corporation (NASDAQ:MSFT) will hold its next earnings call on July 22, and more details about CEO Satya Nadella’s plan for the technology giant are expected. But until then, are there any clues? Nomura analysts have examined Nadella’s memo to employees and note that he has outlined more organizational changes, accountability and steps to increase innovation.

Satya Nadella Microsoft

Microsoft may cut jobs

In a report dated July 10, 2014, analysts Rick Sherlund, Frederick Grieb and Kashif Sheikh say they expect Microsoft to announce more job cuts, possibly between 5% and 10%. That includes reductions from the approximately 25,000 employees the company gained by acquiring Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s former devices division. Microsoft already had almost 100,000 employees before that acquisition.

The Nomura team said a 25% reduction of the Nokia employees would cut approximately $1 billion off Microsoft’s cost structure and “still have the company lose” around $1 billion or 10 cents per share in the 2015 fiscal year. They say an incremental 5% reduction in pre-Nokia headcount could save approximately 20 cents per share. This means the Nokia acquisition “dampens” Microsoft’s earnings per share by 10 cents, which means reducing headcount could make up for it, plus some.

At this point though, they aren’t including any job cuts in their model because Nadella hasn’t actually confirmed any of this.

Confusion at Microsoft

Sherlund and his team say they are confused by what Nadella said about focus. He mentions it and then “goes on to articulate how they need to be in devices like Surface first party hardware and Xbox.” As a result, they’re unsure what he means by focus if he intends to keep all of Microsoft’s business, including Bing. They think the worst thing Nadella could do is “be incremental” and “just rearrange the chairs.” He does say they will be talking about how to bring innovation back in July and that what they do will be “bold.”

Beyond Office, the analysts say Microsoft is looking at innovating into a “new generation” of apps for productivity that center on the user. They say this plan would appear to use all of the company’s current assets while focusing on privacy and security, as well as productivity. They add that new apps would enable Microsoft to further leverage the cloud and also third party developers.

Innovation is top priority at Microsoft

The analysts say Microsoft’s top priority right now is innovation and that they expect an analyst meeting will be held at some point after the July 22 earnings call. Some possible issues that could be discussed are share buybacks, cutting costs, and more about the dynamics of how Microsoft is transforming itself into a subscription and cloud business.

They also think Chief Financial Officer Amy Hood will be able to talk more about the transition, suggesting that 2015 could be the “trough” in impacts from the Office 365 transition and the revenues and margins it brings. They say this could be good news for Microsoft shares.

The Nomura team continues to rate Microsoft as a Buy with a $45 per share price target.