Microsoft Corporation (NASDAQ:MSFT) will release its next earnings report tomorrow, and investors will undoubtedly be prepared to grill CEO Satya Nadella, reports the Financial Times. Last week he announced deep job cuts in the devices division they acquired from Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V). That announcement boosted Microsoft stock to its highest level since 2000.
Where Microsoft will go next
This earnings report represents Nadella’s first chance to explain his broader plan for Microsoft. He hasn’t offered many clues during the first five months of his time as CEO. Nadella has said, however, that he will provide more details along with tomorrow’s earnings report.
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Analysts note that the 18,000 job cuts Microsoft announced last week amount to just 6% of the company’s global workforce. In other words, it doesn’t make much of a dent. Nomura analyst believes that as Microsoft hires more people in the businesses in which it is expanding, most of those job cuts will be offset.
MIT professor Michael Cusumano told the Financial Times that Microsoft continues to have “way more people in their product groups than they need.” In fact, he thinks the company needs to really cut deep, slashing by as much as 80% in order to “end the feature-creep and complexity that have hurt the company’s products.” He also doesn’t think that the company will be able to speed up its pace of innovation by eliminating the jobs it has. Nadella had said he hoped to speed up innovation.
Microsoft to narrow focus?
Recently Nadella sent out a memo to employees, but the plan he set forth was rather vague, although he did say that the core of Microsoft will become “productivity and platforms.” He didn’t indicate whether they will be trimming down their focus. Citibank analyst Walter Pritchard said it still seems like Microsoft wants to “do everything.” Analysts agree that at this point, more questions remain than answers.
On tomorrow’s conference call, Nadella will probably face questions about his mobile strategy, which still remain unresolved. Pritchard said the company is pretty much where it was before and that it seems difficult for any company to get back into the business within just two years.