Nokia X'd: Microsoft Goes All In on Windows Phone

Nokia X'd: Microsoft Goes All In on Windows Phone

You can kiss Plan B goodbye. And good riddance

Despite recent rumors that Microsoft would hedge its bets on Windows Phone by expanding the Android-based Nokia X lineup, the firm announced today that Nokia X is effectively dead. Instead, Microsoft will shift its handset focus to Lumia-branded handsets that target the volume, low-end of the market. And it will "shift" coming Nokia X designs to Windows Phone and brand those devices as Lumias.

Microsoft just went all in on Windows Phone.

Can I get an Halleluiah?

News of this change comes courtesy of an open letter to employees from Microsoft Devices executive vice president Stephen Elop. (You can read the full letter in Stephen Elop Memo to Employees About Changes to Microsoft's Devices Business.) And of course I recently openly worried about the fate of Windows Phone in Plan B for Windows Phone?. Here, I'd like to highlight the parts of the Elop memo that relate to Windows Phone and Microsoft's evolving strategy for this platform.

Here are the key bits.

"Our role is to light up this productivity strategy for people ... To align with Microsoft's strategy, we plan to focus our efforts."

Broadly speaking, all of the products that fall under Elop's Devices business—Windows Phone, Surface, PPI screens, even Xbox One (sort of)—will follow Microsoft's new "productivity first" mantra. But while this direction impacts Windows Phone the most—the platform was originally designed to target the Apple-fixated consumer crowd, remember—it's important to understand that the Windows Phone was already generally heading in this particular direction. Windows Phone 8.1, for example, finally adds the types of features and functionality that enterprises have been asking for.

"The role of phones within Microsoft is different than it was within Nokia."

At Nokia, the hardware business was "an end unto itself," as Elop puts it; in other words, it was Nokia. But at Microsoft, the hardware business must "embody the finest of Microsoft's digital work and digital life experiences," and add value to Microsoft's overall productivity-first strategy. Because of this stark difference, Microsoft's phone business—which is a combination of previous Windows Phone OS efforts and the Nokia acquisition"—is changing.

"We will be particularly focused on making the market for Windows Phone."

Satya Nadella used this same strange turn of phrase—"making the market..."—just yesterday. Now we know what it means...

"In the near term, we plan to drive Windows Phone volume by targeting the more affordable smartphone segments, which are the fastest growing segments of the market, with Lumia."

As it was at Nokia, Lumia is Microsoft's first party Windows Phone smart phone brand. And as it was at Nokia, Microsoft will focus largely on the low-end of the market in the short term in order to drive volume. This is important because Windows Phone is currently stuck at just 4 percent market share globally.

More on "making the market"

"In short, we will focus on driving Lumia volume in the areas where we are already successful today in order to make the market for Windows Phone," Elop explained. "With more speed, we will build on our success in the affordable smartphone space with new products offering more differentiation. We'll focus on acquiring new customers in the markets where Microsoft's services and products are most concentrated. And, we'll continue building momentum around applications."

To aid in this strategy, coming Nokia X phones will be "shifted" to low-end Lumia devices running Windows Phone

This is the best bit, in my opinion: The pointless (to Microsoft) Nokia X lineup, which runs on Android, is being neutered in favor of Windows Phone. Bravo to that. "We plan to deliver additional lower-cost Lumia devices by shifting select future Nokia X designs and products to Windows Phone devices," Elop wrote. "We expect to make this shift immediately while continuing to sell and support existing Nokia X products." Sounds like this is the end of the line for Nokia X.

"And in the very lowest price ranges, we plan to run our first phones business for maximum efficiency with a smaller team."

This is of course tied to this week's layoff announcement, and it suggests that the team of people that is dedicated to Microsoft's low-end handset hardware—i.e. former Nokia employees—will be cut dramatically despite this unit's importance to Windows Phone.

"To win in the higher price segments..."

This one is a lot vaguer, and it's not clear to me that Windows Phone will ever win in the higher price segments. But here's how he described it. "We will focus on delivering great breakthrough products in alignment with major milestones ahead from both the Windows team and the Applications and Services Group. We will ensure that the very best experiences and scenarios from across the company will be showcased on our products. We plan to take advantage of innovation from the Windows team, like Universal Windows Apps, to continue to enrich the Windows application ecosystem."

"We plan to consolidate the former Smart Devices and Mobile Phones business units into one phone business unit that is responsible for all of our phone efforts."

This refers to former Nokia business units, the first of which focused on Lumia handsets and tablets and Asha feature phones and the latter of which focused on the Nokia branded "dumb" phones. This new phone business will be led by Jo Harlow and key members of both former business units. And "this team will be responsible for the success of [Microsoft's] Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the [dumb] phone business."

Our phone engineering efforts are expected to be concentrated in Salo, Finland (for future, high-end Lumia products) and Tampere, Finland (for more affordable devices).

This is smart, from my perspective. The things that are unique about Lumia and Asha handsets come from Finland, and they should stay there.

The big changes are all with Windows Phone

"There will be limited change for the Surface, Xbox hardware, PPI/meetings or next generation teams," Elop wrote. "We will continue our efforts to bring iconic tablets to market in ways that complement our OEM partners, power the next generation of meetings & collaboration devices and thoughtfully expand Windows with new interaction models." (No word on whether "our iconic tablets" means only Surface or Surface + Lumia tablets.)

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