Let me be upfront for those who think this analysis may be biased (and who think about sending me hate mail). I am not anti-Microsoft. But I have to call things as I see them. And let's be honest -- Microsoft's effort in the phone space is a disaster (although it is doing good things in the Surface product lines).
It never should have bought Nokia's phone unit to begin with (thank Stephen Elop's influence on Ballmer for that mistake). Shutting it down was a smart move by Satya Nadella (and the majority of his decisions so far have impressed me). But continuing to invest in the phone side in either hardware or OS makes no sense, even with Microsoft's impressive resources.
Which brings me to speculate about what's next. There is some conjecture that Microsoft may announce some new, updated devices at Mobile World Congress coming up in a few weeks. MWC is a typically busy time for phone manufacturers to bring out their latest wares. But will anyone care about a Microsoft phone announcement? In my opinion, it's just too little too late.
Microsoft actually missed a major opportunity for Windows phones in the enterprise. The company never got it together marketing-wise (or organizationally, with competing product lines until recently running the confusing show). A triple play of Windows 10 on PCs, tablets and phones would be appealing to the enterprise if for nothing else than app consistency and ease of management.
But there is currently no consolidated message coming out of Microsoft that companies can hang their hats on, other than the promise that all the platforms will fully converge in the future. This hasn't happened so far (ask enterprises how many of their corporate apps run unaltered on Windows phones), although Microsoft is making some progress in this area. Had a fully merged and app-compatible platform happened a year or two ago it would have had a major impact. But by the time it does, it is going to be too late for Windows on phones to garner any meaningful market share in the enterprise, and probably not much on the consumer side either (which is already slipping).
For consumers in particular, it's all about (the lack of) apps. Microsoft has lost the majority of mobile developers already, and getting them back is not an easy task. Microsoft has tried to before, often with explicit incentives (paying the developers), but it hasn't worked all that well. It's not really a question of the quality of the OS on phones, as Windows Phone is not a bad OS. But the same is true of the troubled BlackBerry OS 10.
In this market where iOS and Android have such a dominate share, it's hard to see how Microsoft, even with all its resources, can have any major impact going forward. And developers go where the volumes (and revenues) are. In its latest quarter, Microsoft sold just 4.5 million phones. Would any major consumer app player be interested?
But what about an enterprise play? Even if a merged Windows OS across all platforms does have some appeal to IT shops, you cannot be successful today in the enterprise (or even SMB) without appealing to the end user/LOB. If users don't like it, it just doesn't happen anymore (with very few exceptions).
So appealing to consumers is even more critical for Microsoft, and it has pretty much lost them. With less than 2% market share (and shrinking of late), the market seems to have already spoken. How many billions has Microsoft invested for such a small return on investment? Compare that to the large revenue stream it gets on royalties from Android devices for relatively little effort/investment.
Of course, I am primarily talking here about Microsoft's efforts around the phone OS. Microsoft still has a huge revenue opportunity in the phone space with its services and products. Office on all platforms, cross-platform device management, compatibility with all things cloud, cross-platform mobile app development (including rapid app development, e.g., PowerApps) and Azure as a platform will all do very well to increase Microsoft's share, particularly in the business community.
That is the real area where Microsoft needs to increase investments. It's where the company will generate significant revenues. And it's where Microsoft needs to take on Google and Apple -- not at the phone OS level. There are signs coming from Microsoft that management now understands this reality (again, credit to Nadella).
My analysis above probably won't make me very popular with Microsoft. But it's time that Microsoft got real and moved its resources to where it can have major impact. Windows 10 powering tablets and PCs has a major market impact and lots of potential, as does apps and services on iOS and Android. But a Windows OS for phones? That's a lost cause.
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