Earlier this week, Microsoft released the numbers of everything it was doing business in. The cloud did fantastic, reaching the halfway point of their goal of $20 billion, up over 70% year-over year. Same could be said to the surface line up, with revenue reaching a new height of $1.35 billion, an increase of 29% from last year. One question on everyone’s mind was “THE WINDOWS PHONE”. You guessed it, the numbers weren’t great. Actually worse, with Microsoft selling 4.5 million Lumias, and sales going down by 49%. This means Microsoft now has just 1.1% market share worldwide, which is the lowest they have gone in the past three years. So, is it the end? Is this the way history is going to remember how windows phone died, and how Microsoft failed in the mobile department?
Microsoft’s strength has always been software. Sure they might be selling a bunch of hardware including Xbox, surface tablets, smart bands and Lumia . But software always remained the key to success for Microsoft. It has got 90% of the market share in PC. Microsoft basically rules the whole of PC’s and laptops sphere. What Microsoft needed most was an ecosystem where transitioning between devices is seamless, irrespective of the type of device you use. This is something Microsoft set out for windows 8, and that is why windows phone is essential to them. And Microsoft gets even closer to accomplishing the dream with windows 10.
“Universal Windows apps are going to be written because you want to have those apps used on the desktop. The reason why anybody would want to write universal apps is not because of our three percent share in phones. It’s because a billion consumers are going to have a Start Menu, which is going to have your app. You start the journey there and take them to multiple places. Their app can go to the phone. They can go to HoloLens. They can go to Xbox. You talk to somebody like Airbnb. It might be more attractive, given our three percent share on phone, for them to actually build something for the desktop and for the Xbox.”
“Because all of this comes down to how are you going to get developers to come to Windows. If you come to Windows, you are going to be on the phone, too. Even if you want to come to Windows because of HoloLens, you want to come to it because of Xbox, you want to come to the desktop, all those get you to the phone. It’s not about let’s do head-on competition. That will never work. You have to have a differentiated point of view.”-Satya Nadella
This explains a part of equation Microsoft has been cooking up. Windows 10 on PC has seen a great adoption rate, so app developers might want to make an app for the PC, or they might want want to make an app for Xbox (the number of Xbox live members reaching 48 million), but because of the new Universal Windows app platform, the app developers are hooked to windows 10 mobile because the app is universal and after a few tweaks in before it needs to be published to the Windows store.
But Microsoft didn’t just stop there. They introduced new tools for devs to use, namely Project Islandwood and Project Astoria, so that it gets easier for them to port the apps from iOS and android, respectively. The later project allegedly did not do well in the testing in the insider program, and it required an android subsystem in the windows os itself, so it was put on hold. But Project Islandwood is up and running, with Microsoft releasing a series of tutorials on how devs could use the project to port their apps from iOS.
What is the second part of equation? Well let’s look at it this way. What was the success story behind windows all these years? OEMs. What is the success story behind android these past years? OEMs. What does Microsoft need, to be competitive with windows 10 in the mobile war ? I think the math here is simple. OEMs. They are always part of the equation.
A walk back in the history
Let’s walk back a little bit into the history of windows phone. Back then, Nokia was the only true supporter when it chose windows phone over android, and stuck with Microsoft and released a series of hardware for every price point. This made Nokia lead the windows phone market, with over 90% windows phone were Lumias. But this wasn’t helping Nokia at all, with its sales declining day by day. Sure it made fantastic devices like Lumia 1020 with 41 mp, which made windows phone shares jump to over 3.5% share of smartphone market, but it wasn’t helping the cause of Nokia. Seemingly, Microsoft had no choice because Nokia was the only mobile company making windows phones, and Nokia had no choice because it selling less and less phones every year.
And so Microsoft did it, that is buying the hardware division of Nokia, before Nokia could take decisions and think about something other than lumia and windows phone (we did see Nokia X smartphone range at the end and nokia z launcher on google playstore, so android might have been something going on internally). And before we knew it, Nokia was history, and it was Microsoft that was selling the lumias. It was Microsoft that was dominating the windows phone sphere. It was Microsoft that had become a direct opponent to OEMs rather than partners. The effects were easily predictable and we saw it, with less and less OEMs making new devices. We even didn’t see a new flagship phone by Microsoft themselves for two years. There were series of low-end devices released by them, in the hopes to capture the emerging markets with dirt cheap Lumias. But this wasn’t helping windows phone at all, and in my opinion was hurting the Microsoft brand.
And then there was the famous write down of Nokia acquisition. Several employees were laid off, and it was claimed that most of them were from Nokia. Every tech guru started claiming how close to demise the windows phone was. Microsoft pulled out from every major markets, with less and less windows phone to be seen in the market. This caused market share to decline dramatically, with Microsoft recording their all time low market share since the start of windows phone as of last week, with just 1.1% of market share of smartphones. But in my opinion, this is where the strategy of Microsoft starts. You see, like I said before, the key to success for windows phone is OEMs, and this the second part of equation Microsoft worked on. So a drop of windows phone market share means a drop of Lumia sales, which means more space for OEMs.
“If there are a lot of OEMs, we’ll have one strategy. If there are no OEMs, we’ll have one strategy. We are committed to having the phones in these three segments. And I think the operational details will become clear to people as they see it.”-Satya Nadella
And to attract OEMs, with windows 10 mobile, Microsoft is thinking and planning ahead of the curve. They basically rewrote all their OSes, and by rewriting them, Microsoft made their different oses closer to each other than ever before, so that killer features like Continuum for phones become a reality. You can see the pattern here. For apps to work for continuum, it needs to be updated to the new universal windows app platform. When you make an app for windows 10, it is already a universal app and can run on windows phone, Xbox and hololens. You need an app for windows 10 because right now more than 200 million people are using it, which can’t be ignored.
“So when I think about our Windows Phone, I want it to stand for something like Continuum. When I say, wow, that’s an interesting approach where you can have a phone and that same phone, because of our universal platform with Continuum, and can, in fact, be a desktop. That is not something any other phone operating system or device can do. And that’s what I want our devices and device innovation to stand for.”-Satya Nadella
The strategy as of now seems to be working, as we are now seeing activities by OEMs, with Alcatel and Xiaomi expected to release their phones with windows 10 mobile. Acer has also released their continuum ready phones. What remains to be seen is if major smartphone OEMs, like samsung and lg, are going to jump on the ship and release their devices with windows 10 mobile flavours.
To make this plan succeed, Microsoft needed user base for windows 10. But they already had it. They had PC users. So they made their new OS a free upgrade for PC users. Because clearly they dominate in that area, claiming 90% of the market shares on PCs. And in my opinion it worked. The adoption number for windows 10 on PC is huge, with over 200 million pcs now running windows 10.
“But what if OEMs don’t do anything, what will be the future of windows phone then?”
“If no OEM stands up to build Windows devices we’ll build them. There will be Lumia devices. So I’m not afraid of saying, okay, it’s all about the OEMs, or it’s all about the ecosystem. It’s about Windows. It is about the overall health of Windows and being grounded in any given day’s reality, but having ambition of where the market is going versus being bound by current definitions.”
Microsoft certainly looks like it has done it’s homework right. But planning is just the first steps you take. Delivering what is planned is the key part of getting success. So far they haven’t really up’ed their game for windows mobile. Lumia 950 and 950 xl, for example, were released with an unfinished “beta” os, and the experience felt fragmented. Windows 10 mobile was supposed to launch in fall last year, but there isn’t any official release date as of yet. These are the things Microsoft needs to figure out, because this is what completes the equation of success, and this is what Microsoft is lacking.
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