Does Microsoft really need to kill Windows Phone in order to survive?

A prominent analyst claims that if Microsoft is to thrive, it needs to abandon Windows Phone, despite the recent $7.2-billion Nokia purchase. Does he have it right, or would killing Windows Phone do even more damage to the company?

Ben Thompson told Computerworld's Gregg Keizer that:

"The tragedy in the (Nokia) deal is that I think Microsoft ought to abandon Windows Phone. The war is over, and iOS and Android won. It would be far better for Microsoft to focus on serving and co-opting those devices, instead of shooting the most promising parts of their business in the foot for the sake of a platform that is never going to make it."

Thompson went on to add:

"It's never been a hardware company. I don't see any reason to expect that they now will become one. The danger is that the services that ought to be pushed, like Office 365, which could run on every platform, are going to die on the vine because of the emphasis on [Microsoft's own] devices."

In other words, he worries that Microsoft will refuse to release Office and other services on platforms that compete with Windows Phone, as a way to help Windows Phone gain market share.

But he's got it wrong. The issue isn't Windows Phone, but Windows itself. Microsoft has already released Office for both iPhone and Android. So Windows Phone isn't holding back Office. Microsoft, though, has held back Office for both the iPad and Android tablets. That's where the troubles are. Morgan Stanley analyst Adam Holt says that Microsoft could gain $2.5 billion in additional Office revenue by releasing Office for the iPad. Gerry Purdy, principal of MobileTrax, believes that Microsoft would gain additional $1.25 billion in revenue in the first year Microsoft releases Office for the iPad and Android tablets, and $6 billion in annual revenue by 2017. Microsoft so far hasn't released Office for those tablets because it hopes that having Office available only on Windows tablets will help gain tablet market share. That strategy has been a dismal failure.

Thompson is right that Microsoft needs to push its service like Office 365, and release them for rival mobile devices. But Windows Phone is beside the point; Windows itself is the point. Microsoft should release Office for both iPad and Droid tablets.

After the purchase of Nokia, Microsoft clearly can't kill Windows Phone. But even before the purchase, killing Windows Phone would have been a mistake. Without a mobile phone OS, Microsoft will be relegated to the past, not the future. Mobile is where the growth is. And Windows Phone, although now only at a 3.3% estimated worldwide market share, has been growing steadily. It's now number three worldwide. IDC estimates that Windows will have 10% market share by 2017. That will add up to serious money. Microsoft believes that by 2017, it will gain $45 billion from Windows Phone and the Nokia purchase. Clearly, those numbers are overblown. Still, it shows Windows Phone's potential.

Giving up Windows Phone would be a serious mistake. Without it, Microsoft's future is slow-growth, and as a spectator to what's next in technology.

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