Satya Nadella Says Changes Are Coming to Microsoft

Satya Nadella, Microsoft’s chief executive, has written a company manifesto of sorts.

His 3,100-word essay, distributed by email to Microsoft employees Thursday morning, is Mr. Nadella’s mission statement and a rallying cry for the staff. Although it contained few specifics, the essay appeared to lay the groundwork for significant changes, to be announced this month.

Mr. Nadella said everyone at Microsoft must find ways to simplify and work faster and more efficiently. “We will increase the fluidity of information and ideas by taking actions to flatten the organization and develop leaner business processes,” he wrote. “Culture change means we will do things differently.”

Those words seemed to hint at the possibility of layoffs. In most years, around the end of Microsoft’s fiscal year on June 30, rumors swirl among employees about cutbacks in different groups as the company defines its plans for the next 12 months. When job reductions occur, though, they are rarely big enough to meaningfully affect Microsoft’s overall head count, which was close to 100,000 at the end of June 2013.

Satya Nadella’s essay, sent by email to Microsoft employees, said the company would “reinvent productivity.”Credit Brendan Mcdermid/Reuters

This year, however, the layoff rumor mill has been especially active. That is partly because Microsoft added 25,000 new employees at the end of April with the completion of its acquisition of Nokia’s mobile division.

Mr. Nadella said in his email that, throughout July, senior executives would reveal “more on the engineering and organization changes we believe are needed.” He said he would discuss changes more when the company released its earnings on July 22.

In a brief phone interview, Mr. Nadella said his motivation for writing the memo was to “galvanize employees around what our soul is.” He declined to say whether the company was contemplating layoffs.

The crux of Mr. Nadella’s essay was an extended description of Microsoft’s mission. Clarifying, rather than drastically redefining, the company’s “unique core,” Mr. Nadella said Microsoft was “the productivity and platform company for the mobile-first and cloud-first world.”

“We will reinvent productivity to empower every person and every organization on the planet to do more and achieve more,” he wrote.

In the interview, he cited Microsoft’s virtual assistant for its Windows Phone devices, Cortana, as an example of the kind of ambitious technologies he wanted Microsoft to produce. He said Microsoft would be able to use Cortana to reduce the drudgery of using something like customer relationship management software. When a meeting between a sales employee and a customer is over, Cortana will be able to detect automatically that the meeting has ended. The software could then automatically pull up the customer’s record for the sales employee so the record could be updated.

He described how Microsoft’s focus on productivity would encompass people’s needs in both their professional and their personal lives. That description seemed to leave one of Microsoft’s most prominent businesses, its Xbox unit, in an awkward spot: outside Microsoft’s core focus.

In the past, many outsiders have called on Microsoft to sell its Xbox unit to simplify its business. Even though Xbox is not part of Microsoft’s focus on productivity, Mr. Nadella wrote in his essay that “the single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming.”

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

The message: Xbox isn’t central to Microsoft, but the company is keeping it. For now.

“I am absolutely thrilled to have the Xbox franchise,” Mr. Nadella said in the interview.

Correction: July 10, 2014 
An earlier version of this post misstated when Microsoft executives would announce more changes at the company. It is in July, not June.