Update: Windows smartphone shipments nose-dive after strategic retreat

Windows Phone
A Windows Phone smartphone on show at Computex 2015 in Taipei Credit: Martyn Williams

And 80% of Windows phone owners desert the ecosystem for Android or iOS

Windows phone shipments took a nose-dive in the third quarter, plummeting 35% from the same period in 2014, researcher Gartner said today.

By comparison, total global smartphone shipments climbed 15% in the third quarter.

Of the 353 million smartphones shipped in the September quarter worldwide, less than 6 million were powered by Microsoft's Windows, making Windows' share 1.7%, Gartner estimated, down from 3% in the same quarter of 2014.

Windows phones shipments tumbled in some of the historic strongholds for the OS, said Roberta Cozza, a Gartner analyst. "In both Latin America and in emerging markets, there were strong declines," Cozza said in a Wednesday interview. "Consumers are moving on to Android. I just don't think that the Lumia brand is strong anymore in the mid to lower end. Microsoft's message doesn't resonate with price conscious consumers."

In Latin America, for example, Windows' share of smartphone shipments dropped to 3.5% in the third quarter, down from 5.5% the quarter before. Meanwhile, Android climbed from an 89% share to 93%. "For the basic smartphone user, Android is still a stronger proposition," Cozza said.

The September quarter was the first full period since Microsoft announced a major retrenchment of its smartphone business and the strategy that had guided it. In July, even though it had written off billions former CEO Steve Ballmer sunk into acquiring Nokia's handset business the year before, Microsoft said it would continue to manufacture devices and push other OEMs to use Windows.

CEO Satya Nadella repudiated Ballmer's plans, but he denied that the company was exiting the business. Instead, he spelled out a strategy that would tightly focus on Windows loyalists, value-oriented consumers, and business workers.

From all evidence, that's not worked.

According to previous forecasts by Gartner, Windows phones represented 2.5% of all second-quarter shipments, meaning that sequentially, Microsoft's business shrank 28%. And two years ago, Windows accounted for 3.6% of all smartphone shipments, or more than twice the share the operating system now controls.

Part of the problem is that Microsoft continues to have little luck convincing other handset makers to launch Windows-powered models; Microsoft's own Lumia line accounts for about 95% of all smartphones with the Windows operating system.

"One thing that would boost shipments is if Microsoft could get a high-profile OEM [original equipment manufacturer] to make the commitment to Windows 10," said Cozza. But she didn't see that happening. "What would be their incentive for one to invest in Windows?" she asked.

Gartner, however, argued that there was still a place for Windows phones, even with Microsoft's downsized goals. Cozza pointed to enterprises as an example of a market better suited to Windows 10 Mobile and Microsoft's revamped strategy.

"They want to support Windows 10 across all devices," she said. An ideal customer would be a professional already deep in the Windows ecosystem, having invested, say, in a Surface Pro 4 or Surface Book, or companies that are strictly Windows-only shops.

That's not much of a market, however. "We remain conservative that Windows 10 Mobile will do little to change the competition," Cozza said.

Her take -- and Gartner's data -- was supported by other research, which showed that Windows phone owners were deserting the platform in droves.

In a Tuesday report (download PDF), communication technology firm Ericsson said that of the Windows smartphone owners who bought a new device each month, just 19% to 20% stuck with the OS. The rest fled for Android or iOS, with the majority -- 55% to 63%, depending on the timing -- switching to an Android device.

Android and iOS device owners are much more likely to remain with their chosen ecosystem, with retention rates for the two operating systems of 82% and 73%, respectively.

With only about one in five Windows phone owners standing by the operating system, it's not surprising that shipments have tanked.

windows' share of all smartphone shipments Data: Gartner

Windows' share of all smartphone shipments drove off a cliff in the third quarter, hitting a new low for at least the last two years.

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