Nokia layoffs raise doubts

Analysts pessimistic after parent Microsoft's announcement

Chinese industry watchers expressed pessimism Sunday toward the prospects of smartphones run on the Windows Phone system after Microsoft announced around 12,500 layoffs in its Nokia Devices and Services unit.

Microsoft will begin to reduce the size of its overall workforce by up to 18,000 jobs in the next year. It is "moving now" to reduce the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months, according to a statement published on its website Friday.

Some analysts think the cut will certainly involve Nokia's business in China and its Chinese employees as China used to play an important role in engineering and manufacturing for Nokia.

"Microsoft plans to reduce engineering in Beijing and San Diego to have supporting roles, including affordable devices in Beijing and supporting specific US requirements in San Diego," said Microsoft China in a reply e-mailed to the Global Times Sunday.

The company also plans to "right-size" manufacturing operations, focusing phone production mainly in Vietnam's Hanoi, with production to continue in Beijing and Dongguan, according to the reply by Microsoft China.

Calls to Gao Xiang, public relation manager of Nokia China, went unanswered by press time.

"The layoffs prove that Nokia's phone business operated in tough conditions," Zhang Yi, CEO of Shenzhen-based iiMedia Research Group, told the Global Times Sunday.

Zhang thinks it is difficult for Microsoft to catch up with Google and Apple in smartphones.

Although Microsoft has always been trying to expand its mobile Internet market, "it is still not good at hardware production," Wang Jun, an analyst at Beijing-based Analysys International, told the Global Times Sunday.

Wang thinks a lack of a healthy ecosystem is the main obstacle for Microsoft to develop its smartphone business.

Some Chinese consumers are also not satisfied with the smartphones using the Windows Phone system.

"The app choices are limited," Li Yi, a Beijing resident who bought a Nokia Lumia 1320 this March, told the Global Times Sunday.

The Nokia Lumia model, which was designed by Nokia, started to run the Windows Phone system since 2011 due to a partnership between Nokia and Microsoft.

Many Chinese Web users are pessimistic about the outlook for Nokia. "If the staff members of Nokia, which has advanced manufacturing technology for handsets, were laid off, how could Microsoft's smartphones compete with the products of its competitors?" Jeffjoy, a Web user who goes by the handle, asked on his Sina Weibo account Sunday.

Nokia's share of China's mobile phone market was just 2.89 percent at the end of the fourth quarter of 2013, ranking tenth among all phone vendors, according to a report released in March by Analysys International. Samsung and Lenovo ranked at the top of the Chinese smartphone market, taking 16.78 percent and 11.21 percent of market share, respectively, in the same period, the report said.

"It was a pity for Microsoft to quit its original strategy of combining software and hardware business together," Cao Yujie, consultant director for IT market research agency CCW Research, told the Global Times Sunday.

Cao had previously thought it was a "win-win solution" for the two when Microsoft announced it would purchase Nokia's Devices and Services in 2013 but now he is not certain. "I can't make out what Microsoft plans to do in the future," said Cao.