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Originally published July 10, 2014 at 8:26 PM | Page modified July 12, 2014 at 4:39 PM

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Microsoft CEO Satya Nadella lays out ‘unique strategy’

A new memo, along with Satya Nadella’s interviews with news media Thursday, marks the first time he has talked in depth about his direction for Microsoft and represents a honing of the broad themes he has laid out since taking the top position in February.


Seattle Times technology reporter

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Since Satya Nadella became Microsoft CEO nearly six months ago, he has frequently used a few favorite catchphrases — “mobile first, cloud first,” “ubiquitous computing,” and “ambient intelligence” — to describe where he thinks computing, and Microsoft, are headed.

Add to the list: “productivity and platforms.”

That phrase now is the guiding star for the company — Microsoft’s focus going forward, according to Nadella in a memo emailed to employees Thursday as the company begins fiscal year 2015 this month.

“At our core, Microsoft is the productivity and platform company for the mobile-first and cloud-first world,” he wrote. “We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more.”

That memo, along with Nadella’s interviews with news media Thursday, marks the first time he has talked in depth about his direction for the company and represents a honing of the broad themes he has laid out since taking the top position in February.

The 3,000-plus-word memo also hinted at big changes to come, talking about sweeping cultural changes and the need for new training and experimentation.

Nadella did not, however, address the layoff rumors that have swirled since Microsoft’s deal to acquire Nokia’s phone business — and about 25,000 of Nokia’s employees — closed in April.

Productivity, platforms

Nadella’s memo recalls similar missives from his predecessors.

In 1995, Bill Gates issued a memo called “The Internet Tidal Wave,” in which he called the Internet “the most important single development to come along since the IBM PC was introduced in 1981” and pushed the company to seize on the emerging opportunities.

More recently, Nadella’s predecessor, Steve Ballmer, began using the catchphrase “devices and services” in memos that talked about the company’s transition from one that primarily made software for PCs into one that produced mobile devices and the cloud services that run on them.

Nadella wrote in Thursday’s memo that “while the devices and services description was helpful in starting our transformation, we now need to hone in on our unique strategy.”

Over the past several months, “the main thing I’ve been obsessed about is: ‘What is Microsoft’s unique contribution in a mobile first, cloud first world,’ ” Nadella said in an interview. “That’s what led to the focus on productivity and platforms.”

By productivity, Nadella means not only the documents, spreadsheets and slides — think Office — associated with the term. Rather, his definition extends beyond producing something to tools that can analyze, predict, give insights and also work on people’s personal behalf.

By platforms, Nadella means not only operating systems such as Windows and back-end infrastructure such as Azure, but also the ability to span the different platforms that people use today, from Apple’s iOS to Google’s Android to Salesforce.com.

Though Microsoft holds only a tiny share of the world’s mobile-device operating systems, the company “has a unique ability to harmonize the world’s devices, apps, docs, data and social networks,” Nadella wrote in his memo.

He also said the company would focus on producing products for “dual use” — to be used both for people’s work and nonwork lives.

“I fundamentally believe that everybody on the planet is a dual user” — whether a parent with a professional job or a student who wants technology to work for school and play, he said. “The question is: How are you able to organize your information, your tasks, and get stuff done spanning those different roles? Nobody lives in isolation.”

The task for Microsoft is to “build applications and platforms that understand that rich context,” he said. An example would be an app that automatically knows when the user is working on something related to her family life versus her work life.

Committed to Xbox

Though Nadella’s emphasis Thursday was on the company’s platform and productivity offerings, he briefly mentioned hardware in his memo. He said the company’s devices, such as the recently released Surface Pro 3 tablet, would “set the bar for productivity experiences.”

“We’re not in hardware for hardware’s sake,” he said in the subsequent interview. “We’re in hardware to be able to express all our platform and productivity software in a way that’s unique.”

He also emphasized his support for Xbox, calling it “one of the greatest consumer franchises out there” and adding that Xbox Live is “an amazing service for us, in terms of fan base.”

There has been speculation for years that Microsoft might sell or spin off its Xbox business. Though the Xbox doesn’t necessarily fit into Nadella’s vision of Microsoft’s core purpose, “as a large company ... it’s important to make smart choices on other businesses in which we can have fundamental impact and success,” he wrote in his memo. Technologies that emerge from Xbox efforts, such as graphics and speech recognition, can also benefit the company’s productivity focus, he said.

“Bottom line, we will continue to innovate and grow our fan base with Xbox while also creating additive business value for Microsoft,” he wrote.

Nadella declined in an interview to provide details of how he sees Nokia fitting into his direction for Microsoft, saying he would talk further about the integration on July 22, when the company releases its fiscal fourth-quarter results.

Nadella also declined to discuss any possible layoffs. Employees are reportedly braced for cuts, according to Bloomberg, which reported Microsoft pledged $600 million in annual cost savings for 18 months after the Nokia deal closes.

‘Simplify, move faster’

To achieve the vision Nadella laid out, there will be big changes designed to make the company more nimble, driven by customer needs and guided by measurable outcomes.

“Nothing is off the table in how we think about shifting our culture to deliver on this core strategy,” he wrote in his memo. “Organizations will change. Mergers and acquisitions will occur. Job responsibilities will evolve.”

One example he offered was that each engineering group will have tools that focus on measurable outcomes and predictive analyses of market trends. The hope is the groups would innovate more quickly.

“Every team across Microsoft must find ways to simplify and move faster, more efficiently,” he wrote.

He didn’t offer specifics, saying only that he and his senior executives will disclose more about the organizational changes over the course of this month.

“Any strategy gets eaten for lunch if you don’t have culture that backs it up,” Nadella said in the interview. “The main call here is: ‘Let’s not get caught up in any past dogmas in terms of how work gets done.’ I want us to be as innovative about processes as we are about the innovations themselves.”

Analyst Daniel Ives with FBR Capital Markets wrote in an email: “We believe the key takeaway from [Thursday’s memo] was Mr. Nadella’s reiteration of the company’s commitment toward its cloud/mobile focus, which we think will ultimately help reignite optimism out of the gates for fiscal 2015.”

In doing so, Ives said, Microsoft’s management is laying the groundwork for a healthy financial year.

Analyst Wes Miller of Kirkland-based independent research firm Directions on Microsoft said Nadella’s email was in the “usual style of a vision memo: Looking back, looking forward. The overarching tenor of it is: ‘Get on board.’ ”

While the memo didn’t offer much in the way of a new vision, “it offers a refinement of what all of us have been looking at for a while,” Miller said. “It’s focusing in on platforms and services — trying to make the most of what is extremely successful for Microsoft today and focusing on those things for the next year. It’s absolutely where they should be focusing.”

Microsoft shares closed Thursday at $41.69, up 2 cents.

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com. On Twitter @janettu.



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