After failing to grow market share, Microsoft cut up to 1,850 jobs on May 25 and will recognize USD $950 million in write-downs. What is the implication for Microsoft’s place in the mobile market?
Microsoft’s acquisition of Nokia’s mobile division is playing out poorly for the company. As market share fell, Microsoft lowered staff count in the phone division. Microsoft also sold its feature-phone unit to Foxconn. The falling commitment for Microsoft on the mobile market implies the company will reinforce its focus on the desktop and enterprise space. This strategy, much like BlackBerry’s, is de-emphasizing itself from hardware sales and building its offering in MDM (mobile device management).
Microsoft may still find success in benefitting from tremendous growth in smartphones. Usage on mobile, by time spent, surpassed that of desktop some two years ago.
Microsoft must clearly continue offering something in this market. Its Office365 productivity app will likely succeed in generating monthly subscription fees. There are also very few (if any) good office applications on tablets or phones. Consumers may consider using PocketBook, a PDF and EPUB reader on Android. WPS Office is another alternative app owned by Kingsoft Office Software, a Hong Kong-based firm.
Selling down the mobile unit also raises questions on Microsoft’s Mobile device + application management strategy. The company may end up ceding market share for its MDM from the cloud solution to BlackBerry. BlackBerry’s acquisition of Good Technology gives the former smartphone darling a bigger market share of the MDM market.
The Surface phone
Microsoft did not confirm it is transitioning the Lumia line-up to the Surface platform by 2017. If that happens, expect its release running Windows 10 Mobile. It will also have OneDrive, Skype, Office365 pre-installed. This scenario makes the most sense.
Implications for Surface tablet strategy
If Microsoft ends the design and manufacturing for smartphones, it gives fans an opportunity to buy the Lumia 950 and 950XL on sale. That proposition is still a risk: expect an end for any support in the future. Enterprises might now wonder what the future holds for the Surface tablets. The Surface 4 gained tablet market share by February 2016, but after Apple released the Pro, that trend is ending.
Microsoft will likely continue developing new tablets even as it winds down smart phone development. The Windows 10 platform relies on the tablet, desktop, and laptop user base. If anything, Microsoft will have more room to cut prices for tablets to encourage adoption of the Surface line-up. As the free Windows 10 upgrade from Windows 7 ends on July 29, enterprises and consumers may finally install the OS update.
The smart phone community benefits if Microsoft does not quit developing hardware in this market. More competition is good for everyone. It will take years of losses for Microsoft to gain share, but Windows Mobile makes Windows 10 and the enterprise’s services more relevant and available anywhere. Abandoning mobile makes little sense.