Microsoft's Tough Choices - Windows Phone
In a very public announcement by Satya Nadella, Microsoft recently announced a $7.6B write down and layoff of some 7,800 employees mostly around the division developing Windows Phone and combined phone development into the overall Windows group.
Considering MS paid $7.2B for Nokia's phone group less than 2 years ago - this is a big change in MS's approach to mobile and reflects how poor of an acquisition decision this was.
MS also announced that they will only develop around 6 phones / year. So what does this mean to the future of Windows Phone and Microsoft's position in Mobile.
Many enthusiast's have been asking for what is described generally as a "Surface" model for Windows Phone. That means one or two "reference" architectures that showcase the capabilities of the platform with the hope that 3rd party OEMs then take that model and develop their own interpretations.
Initially Surface lost money - but with the Surface 3 and Surface 3 Pro models this is now a $1B business for MS. That's the good news..
But on the phone side - MS is between a rock and a hard place. While MS has developed what some call flagship phones like the 1020 and 930 they are old now and they haven't sold well at all. Less than 2% of all Windows phone sales are these higher end devices.
MS developed most of it's market share (3.5% US - Kantar) selling low cost devices. In fact the Lumia 520 is the best selling WP of all time with some 30M+ sold and the Lumia 635 (of which I own 2) holds the largest market share in the US @ 32%. The new 640/640XL are not selling very well at all...
So if MS does go the Surface route with WP - which the new Lumia Cityman/Talkman code names seem reflect that model - chances are that worldwide market share may drop even further and that's a problem for two reasons...
First - even if MS considers the new WP platforms as reference - the current group of 3rd party OEMs building Windows Phones are performing very badly - combined they only hold only about 3.2% of the WP market share. And other big names (i.e. Sony/Lenovo) that said they were going to get into the market have not... And even if MS makes a slight larger line with 6 or so phones - chances are only the low end ones will sell if at all...
Second - MS made a huge strategy change with Windows 10 and Universal Apps hoping to grab the attention of an entire generation of developers that have only developed for iOS and Android. MS is saying hey - in a year or so we will have 1B Windows 10 devices (PCs, Laptops, Phones and XBox) that you can target your apps towards. This strategy makes a huge assumption and that is that Windows 10 is going to be that successful.
Mobile devices outsell traditional PCs & Laptops by 4:1 factor. And with MS having such a small percentage of that market - I don't see the motivation on the part of those developers.
It is obvious that MS's Mobile app strategy includes non-Windows platforms as there is a large portfolio of MS apps now available for iOS and Android. But this also assumes that folks are actually willing to pay for some of these apps. And with lower cost alternatives out there - the competition will be tough..
Bottom line is this - MS is going to try a different approach with Windows Phone to see if it can gain some more traction with corp users, enthusiasts, OEMs and developers for next 2 years - if it can't - WP will be killed.
Considering MS paid $7.2B for Nokia's phone group less than 2 years ago - this is a big change in MS's approach to mobile and reflects how poor of an acquisition decision this was.
MS also announced that they will only develop around 6 phones / year. So what does this mean to the future of Windows Phone and Microsoft's position in Mobile.
Many enthusiast's have been asking for what is described generally as a "Surface" model for Windows Phone. That means one or two "reference" architectures that showcase the capabilities of the platform with the hope that 3rd party OEMs then take that model and develop their own interpretations.
Initially Surface lost money - but with the Surface 3 and Surface 3 Pro models this is now a $1B business for MS. That's the good news..
But on the phone side - MS is between a rock and a hard place. While MS has developed what some call flagship phones like the 1020 and 930 they are old now and they haven't sold well at all. Less than 2% of all Windows phone sales are these higher end devices.
MS developed most of it's market share (3.5% US - Kantar) selling low cost devices. In fact the Lumia 520 is the best selling WP of all time with some 30M+ sold and the Lumia 635 (of which I own 2) holds the largest market share in the US @ 32%. The new 640/640XL are not selling very well at all...
So if MS does go the Surface route with WP - which the new Lumia Cityman/Talkman code names seem reflect that model - chances are that worldwide market share may drop even further and that's a problem for two reasons...
First - even if MS considers the new WP platforms as reference - the current group of 3rd party OEMs building Windows Phones are performing very badly - combined they only hold only about 3.2% of the WP market share. And other big names (i.e. Sony/Lenovo) that said they were going to get into the market have not... And even if MS makes a slight larger line with 6 or so phones - chances are only the low end ones will sell if at all...
Second - MS made a huge strategy change with Windows 10 and Universal Apps hoping to grab the attention of an entire generation of developers that have only developed for iOS and Android. MS is saying hey - in a year or so we will have 1B Windows 10 devices (PCs, Laptops, Phones and XBox) that you can target your apps towards. This strategy makes a huge assumption and that is that Windows 10 is going to be that successful.
Mobile devices outsell traditional PCs & Laptops by 4:1 factor. And with MS having such a small percentage of that market - I don't see the motivation on the part of those developers.
It is obvious that MS's Mobile app strategy includes non-Windows platforms as there is a large portfolio of MS apps now available for iOS and Android. But this also assumes that folks are actually willing to pay for some of these apps. And with lower cost alternatives out there - the competition will be tough..
Bottom line is this - MS is going to try a different approach with Windows Phone to see if it can gain some more traction with corp users, enthusiasts, OEMs and developers for next 2 years - if it can't - WP will be killed.
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