Skip to main content

Why Microsoft Was Wrong To Abandon The Smartphone Entry-Level


Windows Phone was doing pretty well in some countries and in some smartphone market niches, in parts of Europe and South America it had overtaken iOS to be the second most popular platform behind Android. The growth was all about low-end and mid-range phones selling into markets where value for money and low-price were key differentiators.

Last year Satya Nadella decided that he didn’t want these customers any more and signalled a retrenchment that would see Microsoft all but abandon the manufacturing, design and sales capabilities it had acquired from Nokia and move in a new direction that relies on third-parties to deliver handsets, whilst Microsoft focuses on its platform.

Entry-level smartphones are a difficult market to manage. The profit margins available are razor thin and the ongoing cost of support and providing updates don’t add up to a sensible business proposition. Which is why Windows Phone did so well in this space.

Competing Android smartphones were generally pretty nasty, with low specs and lower performance, poor components and limited support; Windows Phones competing with them were. in the main, very good. Nokia had found the sweet spot where it was able to leverage its experience and close links with Microsoft to offer a much better phone and a much better ownership experience.

Now returns on investment in this area are low, but looked at as part of a wider picture these phones make plenty of sense for Microsoft.

Firstly, sales volume. Developers have avoided the Windows Phone platform because their opportunity to profit is restricted by the number of users on the platform. Growth of those numbers draws developers in, especially as competing app stores become so crowded and new apps harder to surface.

Secondly, entry-level users aren’t going to be entry-level users forever. Give them a great user experience, a device that performs above what its entry-level pricing would suggest and when it comes to upgrade time they’ll stick to what they know. Which means a more expensive, more profitable mid-range device.

When trying to break into an established duopoly these are the hard yards that need to be won. For all the bad press that Windows Phone received over the years there was no denying that once Microsoft and Nokia got together things were moving in the right direction. Just not very quickly.

In the year since Microsoft started to unwind its support for Windows Mobile what has happened? Sales have collapsed, with Windows Mobile users across the spectrum moving to Android. Has this happened because Android has got better? Emphatically not. The cheap handsets have proved to be as bad as ever, Google’s updates to users have been more delayed, and even promising new Android handsets at mid-range prices have proved to be disappointing as OEMs over promise and under deliver.

Short of a complete reversal of strategy – and its probably too late for that anyway – Microsoft has lost the smartphone game and with it the long term platform war. Windows 10 may be ‘everywhere’, but sales of PCs are falling, the Xbox is fighting a losing battle with Sony and Hololens has yet to demonstrate that it can provide a better reason for augmented reality than Google Glass did.

Without a strong mobile platform the market migrates to Chromebook and MacOS, driven by owners of Android and iPhones. particularly as the latter gains access to the Android app store and all the opportunities that provides.

For the want of a shoe the kingdom was lost. Right now Windows Phone looks like that missing shoe.


Popular posts from this blog

F1: Robert Kubica Impresses In Renault Test Run

The car may be old but its the performance of the driver that's the story here. Robert Kubica returned to F1, after a fashion, earlier this week with an extensive test run in a 2012 Lotus Renault F1 car at Valencia.
The age of the car and the circuit were likely determined by F1's current rules which ban testing, but the reason for Kubica being in the car is far more interesting. Considered by many to be a potential World Champion and certainly one of the fastest drivers of his generation, Kubica's F1 career seemed to be over after a 2011 crash whilst driving in the Rally of Andora. His Skoda Fabia was penetrated by a guardrail in the high speed accident partially severing his right arm.
Up until last year Kubica has been competing in rallying, with the expectation that the limited movement in his repaired arm would prohibit a return to single seater racing.
So this week's test is both interesting and confusing. Interesting because Kubica completed 115 laps of the ret…

F1: Robert Kubica's Williams Test Asks More Questions Than It Answers

Comparing driver's times at a tyre evaluation test like last week's Abu Dhabi event is difficult at the best of times, but when trying to assess the performance of a driver who has been out of the sport for six years, that difficulty level is raised even higher.
On the face of it Robert Kubica's test for Williams was a success. Fastest of the three Williams drivers present the headlines look promising. However, taking into consideration the different tyres used to set those times muddies the water considerably.
Kubica ran a three lap qualifying simulation on the new 'hyper-soft' tyre - which should have given him a two-second advantage. Correcting for tyres it would appear that Kubica was significantly slower than Sergei Sorotkin - who was on the harder 'soft' tyre - and marginally quicker than Lance Stroll, the team's only contracted driver.

Stroll's family fortune currently funds Williams, so there' no chance that he will be anywhere but in a…

Panos Panay's Defence Of Microsoft Surface Hardware Sounds Eerily Familiar

This weekend I went out with my ten year old daughter to select a laptop for her school year beginning in January. The schools requirements are quite specific, requiring a Windows 10 device, with a preference for a touchscreen and a stylus. She chose a Surface Pro, after trying a large number of different options. Having seen the way I use my own Surface Pro - and tried it herself there was only ever going to be two options - and the other was a Surface Laptop.
I tell you this so that you understand I am a buyer of Microsoft's products through choice, not compulsion. I'm on my third Surface device now. 
So when Panos Panay dismissed reports of the death of the Surface hardware line, I was very interested to see exactly how strong these denials were. Especially how they reflect what has gone before. To whit: Windows 10 Mobile.
Panay claimed that Microsoft is in hardware for the long haul. Almost exactly mirroring the words of Terry Myerson, when he claimed Windows Mobile was g…