The Future of Windows Phone

At the end of 2013, Windows Phone was a distant 3rd in US Smartphone market share at around 5% depending on the market source with Apple and Google taking 43% and 51% respectively.

While that 5% number shows over 150% growth from 2012's 2.2% share, two very concerning trends came out.

First, was the primary driver for that growth was the availability of the cheap Windows phone from Nokia - the 520/521 series.  

Second was that Nokia accounted for well over 90% of all Windows Phones sales.

So why are these two trends dangerous and what does that mean for Windows Phone going forward ?

Dependence on Cheap Phone for Market Share growth

While there is certainly a market for an entry level smartphone and Nokia certainly proved they can produce a good quality entry level device with the 520/521, the reality is MS makes very little money selling these devices.  They also have been discounted quickly.  The "retail" price for the 521 for example was $149.  I purchased on for just $78 and around Christmas I saw the price drop to $59.

Secondly the typical buyer of an entry level smartphone is not going to necessarily buy the associated "services" that MS offers, like Xbox Live, Office 365 accounts or buying paid apps that generate revenue. 

And while Nokia does make some nice mid and high end devices like the 920 and 1020 series devices.  The reality is they are not selling at the volume levels needed.  With all it's hype the 1020 is at selling at less than 3% of all WP sales. 

So this trend is dangerous because the reality is MS is not really making any money with the platform.  It is costing them money.

Nokia accounting for over 90% of WP sales

While there are Windows Phones available from HTC, Samsung and Huawei, the reality is they are not selling.  And while there are rumors that MS is in talks with Sony to produce a WP device, I do not believe that it will make a significant change in the marketplace.   

The reason this trend is dangerous is it becomes a branding and revenue recognition issue.  MS purchased an alliance and eventually bought the Nokia phones/devices unit. MS did this to leverage the Nokia brand's worldwide recognition in the handset space along with their relationship with the carriers.  In my opinion MS spent a tremendous amount of money to buy 5% market share.  

Microsoft wanted to leverage the OEM Licensing model for Windows Phone just as it had with Windows for decades.  But with Nokia being the only real player in the space, they just end up selling to themselves.   

So does MS maintain the Nokia brand or produce an MS labelled phone ?   

18 months ago MS stated it was realigning itself to be a 'device and services' company.  One of the results of that realignment was the creation of the MS "Surface" line of tablet devices.  Yet as of today MS has not announced or even road mapped an MS phone.  This seems so contrary to the device and services model.  This is troubling because it indicates doubt in the device and services strategy.   

So 2014 is to me the make or break year for WP and MS has a lot of work to do to try and keep WP viable.

First - MS has to make a decision on branding.  Do they stay with the Nokia brand or switch to an MS branded device.  If MS is truly committed to the device and services strategy - then in my mind they have to produce an MS branded device line.  They need an entry, mid and high level device that can work on any carrier.  

Second - MS has to be more aggressive in their investments with the mobile app development community.  While the number of apps in the WP Store have certainly increased - the perception has not improved.  You rarely if ever see a Windows Phone store logo when a new service or app is announced.  It's always iTunes and Android Marketplace.  MS is loosing it's mind share in the mobile dev communities and that is not only hurting WP, but it is also hurting Windows.

Third - MS has to vastly improve their Marketplace experience.  While they promote a "singular" experience across phone, tablet, PC and Xbox, the reality is it's not.  

Without these changes - WP will continue to be an also ran in the marketplace and MS's relevance in the post PC era will wane.   

The shame of this is that first I don't think MS realizes how tenuous it's situation is and secondly how the continued delays in finding and announcing a replacement for Ballmer is delaying any significant move forward.  


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