Microsoft Corporation (NASDAQ:MSFT) is just taking a $7.6 billion charge against the Nokia Corporation (ADR) (NYSE:NOK) business, meaning that the book value of the Nokia assets will be reduced to zero. It’s also laying off most of the people in that business (roughly 7% of its total workforce).

Which is not exactly the same thing.

Windows Phone Identity Crisis

Microsoft wants to pitch its devices against Apple Inc. (NASDAQ:AAPL)’s. But this is difficult when the OS is being licensed to other hardware makers. Also, there is strong demand for low-end Lumia feature phones in some countries, which makes it that much harder to position the brand while not hurting sales.

Microsoft is a small player in a market with two very well-established models: the walled garden of the iPhone and the “free” Android. When Microsoft entered the market, it could initially bank on the Nokia Lumia brand. But the Nokia brand had come for a limited time, so it rebranded to Microsoft Lumia. And with the Nokia brand gone, consumers ended up thinking, “is the Windows Phone like the iPhone or Android?”

Microsoft Chasing Three Rabbits?

Now, Nadella is saying that he wants a “vibrant Windows ecosystem that includes our first-party device family”, which is the main reason that Windows and Devices were combined under Myerson as we pointed out last month.

He’s also saying, “We plan to narrow our focus to three customer segmentswhere we can make unique contributions and where we can differentiate through the combination of our hardware and software. We’ll bring business customersthe best management, security and productivity experience they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.”

Unscrambling all that –

What Nadella appears to be saying is this: We are going to continue making devices, including phones; our mobile effort will include proprietary software and hardware (defocusing hardware partners); our devices will all run Windows; our phones will be tailored for the specific markets we are targeting.

Tying It All Together

Microsoft’s mobile-first strategy is finally taking shape. The company will showcase the Windows OS in devices for “Windows fans” something like the way Google Inc (NASDAQ:GOOGL) does with its Nexus. It will keep a hold on the low-end segment with its “value” set, especially for emerging markets and migrate them to higher-end devices if and when they are ready, without ever leaving the Windows ecosystem. And it will attempt to bundle the “business” set with its other services when targeting enterprise customers.

The plan could just work although there’s still a lot to do. But the big question is, will Nadella/Microsoft pull it off?

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