Microsoft and mobile: Searching for a way forward

Microsoft's rethink on its mobile strategy will have major consequences.
Written by Steve Ranger, Global News Director

Microsoft has been working on phones, on and off, for well over a decade with varying degrees of success. Buying Nokia's smartphone business was meant to herald a new era, but earlier this month, only 15 months after buying it the division, Microsoft made a dramatic u-turn, getting rid of 7,800 staff and taking an $7.6bn write-down.

A few days later, in an interview with ZDNet's Mary-Jo Foley, Microsoft's CEO Satya Nadella insisted that, despite firing thousands and effectively valuing its phone business at zero, Microsoft was still in the business of making smartphones -- albeit with a slimmed-down ambitions, focused on business, budget phones and perhaps a glamorous flagship or two.

Microsoft has managed to scrape together a three percent market share, which is nowhere near enough to justify the time and money invested to date. So it's not surprising that it wants to change the focus. And Microsoft's mobile strategy is still interesting, for a number of reasons.

First, because Microsoft is pretty much the only company with the financial might and technical chops to catch up with Android and Apple, however remote that possibility might seem. But if even Microsoft can't break into the market, then we must accept that we're dealing with a two-horse smartphone race for some time to come, and figure out the consequences.

Second, Microsoft's success or failure in mobile has broader consequences for its own future plans. The timing of Microsoft's announcement is interesting because it means the bad news is out of the way before Windows 10 arrives at the end of the month. But it does raise the question: how much of an issue is the absence of a successful mobile strategy for Windows, and Microsoft more broadly?

There's an important shift under way: it's likely there are now more smartphones in use than PCs. And for many people, their default computing device is a smartphone. Indeed, for many in emerging markets the smartphone will be their only device. So what's Microsoft's place in this new world?

The company's short-term plan -- slimming down the array of so-so Lumias to just a handful of well targeted handsets -- makes sense. After all, Apple has managed to conquer the smartphone world with just four (not very different) iPhone models.

A Lumia flagship is long overdue, and there's still some interest from businesses in Windows handsets. Microsoft has also had some success with its Surface tablet in prodding hardware makers into finally taking the odd risk, and making better devices as a result. But it's still hard to imagine why any Android vendor would swap to Windows right now. Pushing key applications like Office onto rival platforms also helps, but won't do much to support Windows.

Microsoft's streamlined strategy does makes sense, but execution is going to be hard, especially with Microsoft letting so much of its mobile expertise walk out of the door.

In his interview with Mary-Jo Foley, Nadella argues that focusing on the smartphone today is just as dangerous as the old assumption that the PC was the centre of the universe. "If anything, one big mistake we made in our past was to think of the PC as the hub for everything for all time to come. And today, of course, the high-volume device is the six-inch phone. I acknowledge that. But to think that that's what the future is for all time to come would be to make the same mistake we made in the past without even having the share position of the past. So that would be madness."

Nadella is right: focusing only on the 6-inch screen is just as dangerous as thinking the PC will go on forever. That's what the sudden rush into wearables over the last couple of years has been about: a large-scale public beta of the next generation of technology.

The trouble is that the wearables market remains nascent at best -- few consumers are interested and the hardware is nowhere near mature. It could be five years or more before they hit the mainstream. And while it's right for Nadalla to say "we have to be on the hunt for what's the next bend in the curve" and " I just don't want to build another phone, a copycat phone operating system, even," it will be difficult for Microsoft to go straight from the desktop to the HoloLens future by leapfrogging right over smartphones.

Much will depend on whether the new streamlined approach to mobile is a success -- and convincing developers to back it. What happens over the next year will be crucial. Microsoft is right to think about the next big thing, but it might be a long time coming.

ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and the US.

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