Goodbye, Microsoft Lumia. Hello Surface mobile?

Microsoft has taken the final step in trading its 'high volume, low cost' sales model for a 'flagship-class, category-defining' one in mobile devices. So what's next?
Written by Mary Jo Foley, Senior Contributing Editor

For years, one of Microsoft's most important mantras was "high volume, low cost." The company grew a lot of its core businesses by undercutting its competitors' prices in order to build a larger customer base.


When Microsoft announced its plan to buy Nokia's handset business -- including the Asha, Series 40 Nokia X feature phone parts of it -- it seemed Microsoft was going to continue along that high volume/low cost path. Even though those phones didn't run the Windows Phone/Windows Mobile operating system, Microsoft's plan at the time seemed to be to treat these phones as a gateway to transition users to its Windows Phone platform (someday, somehow).

Microsoft's announcement today that it is selling off the remaining feature phone part of its mobile business and only "supporting" (not continuing to manufacture new models) of its Lumia Windows Phone line is yet another instance of Microsoft signaling "our strategy has shifted." In this case, however, the shift wasn't sudden or even really new.

Microsoft CEO Satya Nadella announced in 2015 that hardware, for Microsoft was meant to be a supporting player for Microsoft's software and services. Surface tablets, Lumia phones, non-Lumia-branded feature phones, Xbox, and the Microsoft Band were meant first and foremost to sell Microsoft software and services. That was a big change from former CEO Steve Ballmer's plan, which was to try to go head-to-head with Apple in the consumer-tech space.

Nadella also made it clear a year ago that in the PC/tablet/phone space, Microsoft's priority was to be in the premium market. That positioning was likely spurred by the new Microsoft's goal of alienating less its PC and phone partners by refraining from competing head-to-head with them in all markets. Microsoft's premium, "category-defining" positioning also was meant to help the company guide its OEMs/partners to build more differentiated, well-made devices.

Last July, Nadella said Microsoft would be scaling back the number of phones it would launch, focusing on three key markets: business users, flagship/fan customers and "value phone" buyers. We don't know if Nadella and team are still targeting these same three markets now or just the first two. I expect we'll hear more in July when he publishes his latest state-of-the-state marching orders for the company.

The one thing I do continue to hear is that Panos Panay, who has headed engineering for all of Microsoft's hardware since July 2015, is pushing ahead with building new phones and other types of new devices.

If Nadella and the management team deem any kind of new phone/mobile device line, which will likely be branded as "Surface," as something differentiated enough to help Microsoft sell more software and services, I believe Microsoft will announce that new Surface device family around the spring of 2017. (I say "if" here because Nadella opted to ditch Microsoft's Surface Mini tablet despite having manufactured thousands of them, before they were brought to market because they didn't pass his differentiation test.)

If Microsoft makes Continuum and remote desktop services the centerpieces of any future Surface mobiles, the company might have a device family that would both appeal to business users and not be constrained by a lack of apps. I'm guessing a Microsoft Surface phablet might share some similarities with the coming HP Elite x3, which will be able to use Microsoft RemoteApp or Citrix app virtualization to run existing business apps on a variety of screen sizes.

Until then, Microsoft's presence in first-party phone hardware will continue to be relegated to not much beyond supporting existing Lumia devices and, as I'm sure company officials hope, trying to stem the steep and continuing losses from Ballmer's Nokia phone deal.

Editorial standards