Windows Phone Isn't Dead, It's Changing

Windows Phone Isn't Dead, It's Changing

If you believe some headlines, Windows Phone is dead. Not today or tomorrow, but possibly sometime in 2016. Yesterday's news, delivered in a corporate email from Microsoft CEO Satya Nadella, read that Microsoft is completing the elimination of all things Ballmer by reorganizing strategy for its Windows Phone business. Using many of the same flowery, political sounding statements and buzz phrases we've come to now expect since he took office. Things like:

In the near term, we will run a more effective phone portfolio, with better products and speed to market given the recently formed Windows and Devices Group.


In the longer term, Microsoft devices will spark innovation, create new categories and generate opportunity for the Windows ecosystem more broadly. Our reinvention will be centered on creating mobility of experiences across the entire device family including phones.

But really it boils down to this: If it still smells like Ballmer, it must go.

Nadella inherited a Nokia business Ballmer paid too much for. Microsoft's latest CEO was never in favor of the acquisition. Even Microsoft's board, which included Bill Gates, was against the purchase. Reports say that Ballmer resorted to a child-like rant in front of the board, strongly proposing that if the acquisition didn't go through he didn't belong as Microsoft's CEO any longer.

Well, we know how that went.

Nadella has spent almost his entire tenure so far trying to fix what he believes to be the sins of the past and things that could keep Microsoft from competing in the future. So far, the story he's written has been good. There have been bumps along the way, but at least in the media, those bumps have been smoothed over and forgotten. Still it's hard to forget that since Nadella's rise to power, over 30,000 people have lost jobs with Microsoft with 7,800 of those coming in this latest round of sharpening business focus. The majority of that job loss comes in the phone business, but I've heard from others that other areas are getting hit. For example, it's been reported that the entire Small and Midmarket Solutions and Partners Group is also gone.

So what does this refocus get us besides vacant positions?

Windows Phone devices remain in the channel. There's no less than 10 models floating around at any given time from phablets (like I reviewed recently) to mid-range (reviewed here) to low-range. These are fantastic devices and, in my opinion, run on the best mobile OS available. But, unfortunately, I'm in the minority. And, if you truly want a Lumia, which one do you choose? The unfortunate thing is that the majority of the consuming public doesn't want a Windows Phone. There's many reasons why which I've gone into before HERE and HERE.

It's easy to blame carriers for mobile hardware and OS woes, and how they approach which device gets top billing, but in some respects it's Microsoft's own fault. The company has been very bad with positioning, marketing, and developing carrier partnerships. Microsoft has never been able to strum the heartstrings of consumer wallets just right.

One source said this…

In the past, we invested in areas where we saw other people making money…but this was always behind the curve, even if it was the right direction.

Clearly, what's left in the channel today is just remnants of the Nokia mobile business acquisition. The models that are available today were probably already in the manufacturing schedule and would've been too costly to shut down. Nadella only needed to wait until the last of the acquired devices were off the assembly line to close up shop and refocus Microsoft's mobile hardware plan.

So, what's the plan?

According to reports, Microsoft will manufacture just 6 devices per year. The types of models that will be produced are unclear, but I can only assume that we'll see new hardware released in stages throughout the year with 2 large screens, 2 mid-range, and 2 low-end devices – all running Windows 10 Mobile. In this way, the handsets will be targeted toward types of people with specific preferences. These devices boil down to what Satya calls a narrowed focus to three customer segments, or categories:

  • Business phones - offering the best management, security and productivity experiences
  • Value phones - available for those cost-conscious consumers that still need good communication services
  • Flagship phones - top-of-the-line consumer phones with stellar features (eg. camera)

If you look at Apple for the comparison, it now consistently releases at least 2 models per year, all focused on the high-end. A couple years back Apple attempted to enter the lower end market, but failed miserably due to the proliferation of cheap devices built on Android. Apple's phones don't cost more to make, but the company has found its revenue niche in slapping what I call luxury taxes on its devices. If it cost more it must be better, right? Consumers seem to think so.

So, while Microsoft is paring back on the number of devices it produces, it seems to still be in a mode of throwing ideas against the wall to see what sticks. So, a refocus may not be a true focus at all. We'll have to wait and see, but the refocus still comes with risk. One source seems to agree…

Satya looks to be identifying the direction where the most potential money lies, and that we invest the majority of our resources in those areas and try to "win" there. While the old approach was profitable, it was extremely safe. The new approach is higher risk, but we might actually have a greater impact (if we do it right).


They talk about it "sharpening our focus", which is good. Let’s just hope they don’t go too far off the reservation.

At this point in Nadella's tenure, many of you may be close to getting transformation fatigue. There's not a day that goes by where there's some tidbit of news coming from Microsoft, and most generally it's monumental. Nadella is definitely altering the face of Microsoft, what this means for the long term has yet to be written. For its hardware business, including Windows Phone, the company is not exiting the market – it's just retooling in an effort to make it more sustainable.

It's best not to forget that Microsoft is a software company.

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