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Three years after $7B Nokia deal, Microsoft’s smartphone strategy has changed dramatically

It’s arduous to imagine that it was solely three years in the past in the present day that Microsoft officially completed its purchase of Nokia’s units and companies enterprise for greater than $7 billion. The deal was purported to propel Microsoft into the quick lane of the smartphone enterprise, however as an alternative Microsoft’s share of the US smartphone working system market has fallen from 3.8 % in April of 2014 to 1.7 % in the present day, in line with the latest figures from the Kantar Worldpanel Comtech analysis group.

New worldwide market share numbers from Worldwide Knowledge Company (IDC) are much more stark. IDC’s Worldwide Quarterly Mobile Phone Tracker forecast final month estimated that Microsoft’s Home windows Cellphone market share will likely be 0.1 % worldwide for 2017. The analysis agency instructed that the decline in market share is partially because of the lack of unique gear producers signed on to make telephones utilizing Microsoft’s Home windows 10 Cell platform.

“It’s unclear at the moment if Microsoft has a transparent plan to steer OEMs to get again on board with the platform, or if it plans to launch a tool itself prefer it did with Floor units,” stated the IDC report. “Till this manufacturing query is addressed, IDC doesn’t see a transparent path to turning across the platform.”

Microsoft’s acquisition of Nokia was introduced beneath then-Microsoft CEO Steve Ballmer’s tenure, and accomplished beneath present CEO Satya Nadella, who later narrowed the company’s smartphone focus. Since finishing the Nokia acquisition, the company has shed many thousands of jobs — many associated to consolidation and an $8 billion restructuring a yr after the Nokia deal.

In an announcement to Geekwire this week, Microsoft reiterated its dedication to cellular units. “We are going to proceed to develop Home windows 10 Cell and help Lumia telephones such because the Lumia 650, Lumia 950, and Lumia 950 XL, and telephones from OEM companions like Acer, Alcatel, HP, Trinity and VAIO,” stated Microsoft in its assertion.

Answering a shareholder’s question last fall, Nadella stated Microsoft is “not stepping away or again from our deal with our cellular units.” He defined, “What we’re going to do is focus that effort on locations the place we have now differentiation. If you happen to take Home windows Cellphone, the place we’re differentiated on Home windows Cellphone is on manageability. It’s safety, it’s Continuum functionality — that’s, the flexibility to have a telephone that may act like a PC. So we’re going to double-down on these factors of differentiation.”

Microsoft was by no means going to have any straightforward time making successful of its Nokia deal, stated Ranjit Atwal, analysis director at Gartner, Inc.. “Microsoft by no means actually had any share when it closed,” he stated in an interview. “The telephone market continued to be dominated by iOS on the excessive finish and Android gamers are capable of differentiate themselves higher within the mid-tier.”

The opposite main difficulty — and the one which dominated a lot of the protection of Microsoft’s cell phone initiatives during the last three years — was the dearth of nice apps that might flip Home windows telephones from attention-grabbing, well-designed curiosities into must-have units. This became a significant stumbling block, stated William Stofega, IDC program director for cellphones.

“The standard of the apps within the retailer was inferior – not each considered one of them – however quite a bit in comparison with Apple or Android,” Stofega stated. “So you’ll begin to see loads of corporations transferring over to Android.” Since many app builders solely had restricted assets to develop their typically very cheaply-priced merchandise, they sometimes restricted their work to “the 2 platforms that paid” by way of gross sales quantity, he stated.

Gartner’s Atwal concurred. “The problem was at all times builders and apps,” he stated. “They by no means gained any traction and wanted to take a position extra in that space to make it occur.”

Microsoft has, nevertheless, invested in making its flagship apps – comparable to Skype and significantly Microsoft Workplace – obtainable on competitor cellular platforms. However IDC’s William Stofega says that he doesn’t assume that transfer harmed gross sales of Home windows cellphones and was as an alternative only a recognition of market actuality. “It wasn’t doing a lot for gross sales (of Workplace), simply conserving it within the Home windows group,” he stated.

The “Continuum” functionality of Home windows 10 Cellphones permits the units to double as PCs as a solution to make them extra helpful — an instance of Microsoft’s capacity to leverage its conventional energy in PCs for cellular options. However Gartner analyst Ranjit Atwal, for one, doesn’t seem satisfied that this can make an enormous distinction to clients.

“Continuum is proscribed to PCs changing to tablets within the 2-1 phase,” he stated. “Almost about telephones, it has not caught on.”

He additionally dismisses the possibilities of success for the “Surface Phone” that has typically been speculated about by commentators however by no means confirmed by Microsoft. “(It will) solely be to maintain cellular alive inside Microsoft,” he stated, suggesting that Microsoft ought to as an alternative deal with the wants of its loyal and well-established enterprise and enterprise clients – significantly on securing cellular units. “The place there could also be prospects is round safety on telephones,” Atwal added. “Extra devoted safety on the working system and {hardware} stage could be interesting to customers.”

Finally, it’s as much as Microsoft to reply this query. Nadella was pragmatic in his statements last fall.

“We are going to maintain taking a look at totally different types and totally different features that we will convey to cellular units, whereas additionally supporting our software program throughout a wide range of units,” the Microsoft CEO stated on the time. “In order that’s the strategy you will notice us take. We aren’t stepping away from supporting our Home windows Cellphone customers. However on the identical time we’re recognizing that there are different platforms in cellular which have increased share, and we need to make it possible for our software program is accessible to them.”

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