Microsoft and smartphones: What could it have done differently?

Steve Ballmer says that Microsoft's mistake was not getting into hardware faster -- but that's just one of the reasons the company didn't become a smartphone giant.
Written by Steve Ranger, Global News Director

Vista, and the inability to make its own hardware, took the blame for Microsoft's smartphone woes.

Image: Microsoft

Microsoft should have moved much faster to make its own smartphone hardware, said former CEO Steve Ballmer, in a recent interview with Bloomberg.

"I would have moved into the hardware business faster and recognized that what we had in the PC, where there was a separation of chips, systems and software, wasn't largely going reproduce itself in the mobile world," he said.

Ballmer said that Microsoft should "have been in the hardware business sooner in the phone case," and that another -- perhaps unexpected -- reason for that not happening was Windows Vista, which debuted in November 2006.

The Vista release "sucked up a huge amount of resource for a much longer period of time than it should have, because we stumbled over it, and when you have a lot of your best engineers in a sense being non-productive for a while it really takes its toll," Ballmer explained.

Despite spending billions on acquiring Nokia's phone business in 2014, Microsoft has now largely given up on being a player in smartphones (see chart), although there remain some suggestions that it might have one more try with a 'Surface-phone' next year.

But for now, having failed to make a dent on market, Microsoft seems resigned to putting its apps onto other companies' smartphone operating systems.

Image: ZDNet / Data: company filings

So, if Microsoft had bought Nokia earlier, say in 2012 rather than 2014, would that have really made any difference?

Of course, Microsoft had a long history of making mobile software: before Windows Phone it had Windows Mobile since 2000, and Windows CE and PocketPC before that. It didn't make its own hardware, but relied on the likes of Dell and Compaq to build the devices.

Indeed, market share stats from 2006 show how different the the world was: Windows CE had more than half the market for PDAs (and Nokia had a third of the mobile phone market).


Recognise these names? The way things were in 2006.

Image: Gartner

The first iPhone arrived in June 2007 and everything started to change -- but only slowly. Indeed, taking a look at the smartphone market share numbers here is instructive.

In 2007 Windows Mobile had a 12 percent market share in smartphones -- enough to put it in second place behind Symbian (63 percent) and just ahead of Research in Motion (remember that name?) and 'Linux', which tied with 9.6 percent. Apple only managed a 2.7 percent market share (these figures are all from analyst Gartner).

A year later that had changed: Microsoft remained on 11.8 percent, but iOS had jumped to 8.2 percent, with Symbian on 52.4 percent and RIM on 16.6 percent. By 2009 Apple had overtaken Microsoft with 14.4 percent compared to 8.7 percent -- and the iPhone never really looked back. In 2010 Microsoft's smartphone share was just 4.2 percent.

With the arrival of Android, Symbian's market share evaporated and RIM (later BlackBerry) would also find the competition too hot, leaving us with the two-horse mobile race we have today.

Brave new smartphone world

It seems that Microsoft just couldn't make the jump from being a leader in PDAs to being a smartphone leader, ending up as a niche interest.

Former Nokia CEO Stephen Elop's famous 'burning platform' memo came early in 2011, in which he warned that Nokia was being beaten by Android and iOS. This resulted in the Finnish company adopting Windows Phone as its primary platform, and eventually selling its mobile business to Redmond in Setpember 2013.

Windows tablets through the ages: The good, the bad and the ugly, in pictures

It was hard to imagine Microsoft buying Nokia before that -- although that wasn't the only option, as it could have bought another hardware company, or simply started from scratch, or contracted out its hardware as Google currently does.

What if Microsoft had gotten into hardware earlier? After all, Microsoft has done much to revitalize the PC with its Surface range.

Buying Nokia's hardware business certainly did little for Microsoft's smartphone market share, which suggests that the ability to control its own hardware was not necessarily the problem.

The issue was more complex than just hardware: what set iOS apart -- which the Android makers also seemed to understand -- was how the app ecosystem would be key to making smartphones desirable (and would also lock consumers into a particular platform).

Apple's decision to dispense with the keyboard entirely was another big factor, as was the simplicity of its user interface, which broke with convention (apps not menus), and a focus on consumers rather than business users. Microsoft's background in enterprise tech, even though it had been building phone software for years, meant that it was wrong-footed by all these shifts in the market. The inability to build its own hardware until it was too late to make much of a difference may have been a contributing factor, but it certainly wasn't the main one.

Agree? Disagree? Leave a comment below and let us know what you think.

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