Bye bye, Windows phone

FOR the sake of the Los Angeles Clippers, we hope Steve Ballmer is better at running a basketball team than a software company.

Ballmer, who bought the Clippers for a record $2 billion in August, had engineered Microsoft’s $7.2 billion purchase of Nokia almost two years ago when he was still chief executive of the software giant.

At the time, I said the buyout was perhaps good news for Nokia’s chief executive but not so much for Microsoft itself.

The announcement this month by Microsoft that it would lay off 7,800 employees and write $7.6 billion off the value of its mobile phone division, showed just how damaging—and ultimately pointless—its purchase of Nokia was.

The 2013 buyout of Nokia—a pioneer in the mobile phone business that lost its early lead in the industry in part due to its complacency—was Ballmer’s last-ditch effort to make Microsoft competitive against Apple and Google, which dominated the field with the iPhone and Android smart phones. But, as one Google executive tweeted when Microsoft and Nokia first forged an alliance, two turkeys do not make an eagle.

The latest data from the market research company IDC shows just how poorly Microsoft has done, even with the Nokia acquisition.

In 2004, IDC reports, Android and iOS accounted for 96.3 percent of all smart phone shipments, up from 93.8 percent in 2013.

By the fourth quarter of 2014, Android’s share of the smart phone market was 76.6 percent, while Apple had 19.7 percent, with the former slipping 1.6 percentage points and the latter gaining 2.2 percentage points year-on-year.

In the same period, Microsoft saw its market share shrink to 2.8 percent from 3 percent. For the entire year, its Windows Phone platform saw its market share drop to 2.7 percent from 3.3 percent in 2013.

In an e-mail to employees, Microsoft Chief Executive Satya Nadella said the job cuts would take place over the next several months.

He also outlined a new direction for the company’s phone business.

“Today, we announced a fundamental restructuring of our phone business. As a result, the company will take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million,” he wrote.

“I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention. We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.”

While couched in corporate-speak, Nadella’s message was unmistakable. Making phones would no longer be a major focus for Microsoft.

Writing for Forbes, Ewan Spence said there were three lessons to be learned from Microsoft’s misadventure with phones.

First, he said, was the absolute need for third-party applications.

“With no apps Windows Phone was at a serious disadvantage to Android and iOS as the app-economy dominated smartphones. With no impact in the app-economy, no A-list titles, or desirable start-ups targeting the platform, Windows Phone effectively had no users. And with no users developers were unlikely to target the platform,” Spence writes.

Second, Microsoft failed to innovate fast enough.

“Windows Phone took an age to deliver even basic updates. And when those updates did arrive in the form of Windows Phone 8, backwards compatibility with Windows Phone 7 hardware was not present, alienating those who had moved to the platform with the early devices,” Spence says.

Finally, Spence believes Microsoft erred in linking its phone to the Windows brand, adding that “weighing down a project with a poor brand, with a bad history, and with awkward historical baggage will never work.”

While some analysts say the upcoming Windows 10 – and in particular, Windows 10 Mobile – might yet revive Microsoft’s flagging phone ambitions, I’m not holding my breath. Chin Wong


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