It seems as though Microsoft may be about to finally throw in the towel on its smartphone business. Microsoft Mobile was once described by the then Microsoft Chief Executive Steve Ballmer as a “big, bold step forward“. It seems that Satya Nadella, CEO at Microsoft is ready to call time on what has become a major failure. Despite pouring millions into the business and giving it his full backing Microsoft has failed to capture the heart and minds of either consumers or business.
The writing has been on the wall for some time. The utter failure of Microsoft to create a meaningful app store with anything like the number of apps that Android or Apple has is one of the main reasons for the failure. That Microsoft applications are available on both of those operating systems merely means that there was no differentiator that Microsoft could offer. Had Nadella not ported the apps such as Skype and Outlook to other mobile devices though the situation could have been far worse.
During Nadella’s reign at Microsoft its share price has climbed steadily from 39.62 on February 14, 2014 to 52.12 at the close on May 25, 2016. This latest decision may not have seen significant movement in the shares but it will not be holding them back any longer. In February Gartner produced a report that indicated that Microsoft had a 1.1% share of the market in Q4 2015, down from 2.8% in Q4 2016. Nadella, who has not shied away from the hard decisions in the past has finally decided that enough is enough.
Nadella commented: “We are focusing our phone efforts where we have differentiation — with enterprises that value security, manageability and our Continuum capability, and consumers who value the same. We will continue to innovate across devices and on our cloud services across all mobile platforms.”
What shape the mobile business continues to be in is yet to be seen but with 1,350 jobs being lost at Microsoft Mobile Oy in Finland and another 500 jobs globally it is difficult to see a way into the market, with hardware at least for Microsoft. Of the $950 million, $200 million will go towards severance payments that are likely to be completed before the end of the calendar year with the complete restructure complete by July 2017, the end of the company’s fiscal year.
Is the end of building devices for Microsoft?
Probably not. At the time of it acquiring Nokia many commentators felt it was simply trying to replicate the success of Apple in owning the entire ecosystem. While the phone business has been a debacle the Surface business has been more successful. It is likely that it will continue with Surface and even announce a new range of devices in the not too distant future.
Microsoft will also continue to work with those third-parties who have built smartphones using Windows 10 Mobile. There will be some interesting discussions with these partners as to the future of the devices and Microsoft’s commitment to the OS going forward.
Conclusion
Nadella has been slowly undoing the mistakes from the Ballmer era. The Nokia acquisition was probably the largest and most expensive of those and despite Ballmer holding tightly to his own Microsoft Mobile device it seems that few others have. As the next round of mobile contracts come up for renewal it seems unlikely that Lumia phones will be that popular, unless the price is dropped to the point where they are merely clearance items.
What Nadella does next will be interesting. His statement infers that there may be some life in the Lumia phone. However until Microsoft sorts out the app store and creates a platform that developers actually port their software to it seems doomed to failure except in very niche areas. Most software companies barely mention porting their new apps to windows mobile, in some cases despite partnerships with Microsoft, there just isn’t the demand.
