Microsoft had a pretty good earnings report last month as it closed out fiscal year 2016 (its fiscal year ends June 30 of each year). Now people are digging through the financial reports to see what the company didn't disclose in its press release or earnings call, and one unfortunate number has emerged: the pitiful sales of Lumia phones.
It's the latest in the sad story behind former CEO Steve Ballmer's final debacle, the purchase of Nokia's handset business. Nokia was the strongest supporter of Windows Phone, but beyond Ballmer and some Finnish shareholders, no one thought this $7.2 billion acquisition was a good idea. In the end, it cost more than $10 billion in write-downs, which means paper losses, not actual money out the door, but many employees from Nokia have been cut loose as well.
Now we see sales have slowed to a trickle. Revenue for phone division fell by 71 percent year over year, and unit sales fell to a mere 1.2 million devices. For the fiscal year, unit sales were 13.8 million Lumia devices, and the number has steadily fallen. The numbers come from the 10-K form submitted to the SEC.
Q1 FY2016: 5.8 million
Q2 FY2016: 4.5 million
Q3 FY2016: 2.3 million
A total of 12.6 million phones were sold in the first three fiscal quarters. With the yearly total of 13.8, the math is easy.
In addition to the Lumias, Microsoft still has Nokia's feature phone business, popular in lower-income and emerging markets. There, it sold 75.5 million feature phones, a better showing until you compare the 13.8 million Lumias and 75.5 million feature phones against the prior year. In fiscal year 2015, Microsoft sold 36.8 million Lumias and 126.8 million feature phones.
Plus, the feature phone business is going away. Last April, Microsoft announced it was selling the feature phone business to Foxconn, the Chinese giant that makes Apple's smartphone, for $350 million.
Staff cuts not surprising
It should come as no surprise, then, that Microsoft is cutting more workers, many from the Nokia division. In addition to the $10 billion write-down mentioned earlier, for FY2016, Microsoft took a further $1.1 billion in restructuring and related impairment expenses.
The company eliminated approximately 19,000 positions in fiscal year 2015 and 7,400 positions in fiscal year 2016 as part of its Phone Hardware Integration Plan, but it's not done. Another 2,850 roles will be reduced globally during the year as an extension of the earlier plan. Not all are Nokia people, but a lot are.
If I seem particularly irked by all of this, I am. I would much prefer to use a Windows Mobile device. I liked using them when I owned them, but the complete dearth of apps drove me back to the iPhone. In the end, that's the purpose of owning a smartphone.
This was a poorly thought out acquisition from the get-go. It was documented in other press that Ballmer threw a gigantic tantrum with the board of directors, threatening to resign if they didn't approve of the purchase. Those fools should have called his bluff because nothing good has come of this. Supposedly Microsoft will launch a Surface-branded phone next year, but after this mess, who would support them?