What The HELL Is Microsoft Doing With Windows Phone?

Blogs Evan Blass 12:47, 28 Jan 2015

Windows Phone itself is a fine platform. But the best product is not always rewarded with the most sales, as HTC will solemnly tell you

Microsoft has a problem. That problem is no secret: as users become less and less reliant on traditional desktop computing -- an area it has traditionally dominated -- and begin to perform more tasks on mobile devices (phones, tablets) -- where the company has not always, but has lately, struggled -- it's facing a grim future mostly dominated by rivals more popular in the marketplace. If this was only a consumer problem, then Redmond could double down on its enterprise offerings (as it is already doing with cloud-based applications and storage) and call it a day.

But it's not so easy to completely cede the mobile arena, especially when enterprise customers are beginning to open up their own walled gardens and giving employees iOS and Android devices instead of, or in addition to, the traditional Windows- and BlackBerry-powered products. Android is especially worrisome to the Windows giant, as it employs much the same white box relationship with its mobile hardware partners as Microsoft does with its desktop and server OEMs; in fact, many of these manufacturers have their feet in both camps, building Android phones and tablets alongside their Windows enterprise hardware. Samsung's main mobile product for corporations is not a Windows Phone solution, but the K.N.O.X security suite that hardens its consumer Galaxy line into enterprise-suitable business devices. In short, where once Microsoft dominated both the desktop and mobile spaces, it's now fighting to stay relevant in both arenas.

New releases –– all low-end fare –– hardly inspire confidence in the platform either, and Microsoft does have a HUGE amount of dedicated, platform evangelists on its hands (just take a look at any article bashing Windows Phone to see what I mean). And all these guys want is a handset to believe in, something that says, “Hey, now THIS is what Windows Phone is all about…” But since the Nokia acquisition all Microsoft has done is pump out a stream of uninspiring low-end devices under the pretence of “powering the next billion” –– whatever that means.

One need only take a look at the lackluster performance of Windows Phone (gradually losing the "Phone" descriptor in order to portray it as just another flavor of Windows). As a platform, not only has WinPho managed to keep pace with its major rivals, but also its proponents are near cultish in their devotion to its technical and performance superiority. In many ways, Microsoft enjoyed this same adoration for its previous generation of handhelds, the Windows Mobile series, but those devices were big fish in small ponds. The rapid growth of the smartphone industry, combined with a complete reboot of the mobile strategy, gave players like Apple and Google a wide open playing field to capture serious share in what has become a much more lucrative market. 

Kantar Worldpanel just released its smartphone numbers for the month of October -- a country-by-country breakdown of platform market share, allowing for easy comparisons among the operating systems over time. As expected, Apple, thanks to a pair of well-received new devices in the iPhone 6 and 6-plus, was the biggest winner in terms of month-over-month growth, in the US.

As it stood at the end of October (the new iPhones went on sale in mid- to late-September), iOS handsets accounted for 41.5% of devices sold, while all Android devices combined enjoyed over half the market, at 53.8%. And Windows Phone? Just a blip on the radar, with 3.6% of phones sold (to be fair, that number is down from 4.3% the month before, although during the same two-month span in 2013, Windows Phone actually saw a slight gain in sales even in a period that saw the release of the iPhone 5S and 5C.) 

Windows phones are also not faring quite as poorly in some other countries (though in some major ones, like China, they barely make the chart, owning just 0.5% of the market in both China and Japan) Western countries, especially European ones, have shown the platform a somewhat warmer reception, giving it 13.8%, 10.3%, 7.7%, and 7.0% share in Italy, France, Great Britain, and Germany, respectively. 

Italians, in fact, bought more Windows Phones than iPhones in October -- but both platforms were far overshadowed by the 70.2% market share enjoyed by Android (in the U.S.). Japan is the only country in the world where iOS has come within a stone's throw of Android's dominance, lagging Google's OS by just a tenth of a percentage point in October, 48.0% to 48.1%.

Looking at the history of Windows Phone performance in the US is a frustrating experience, from one who respects and roots for the platform. In February 2012 -- the farthest these numbers go back -- Windows Phone sat at just 2.7% of the market, bested by even the floundering BlackBerry at that point. Redmond's greatest triumphs, if you will, occurred back in March and April of 2013, when US market share crept up to 5.6% for those two consecutive periods. Otherwise, the popularity of the platform has rollercoastered over the past 2.5+ years, where market share tends to vary between a fairly narrow band of the mid three-percents to the low five-percents. 

What's most curious about this phenomenon is the Windows Phone itself is a fine platform, superior in many ways to its rivals, and fervently defended by its fan base. But the best product is not always rewarded with the most sales, as HTC will solemnly tell you, and Windows Phone's perceived failure in the marketplace has left it with a dearth of popular apps that many people consider "must-haves" on their devices.

From a developer's perspective, it's not hard to see why resources would be poured into the two major platforms, with WinPho only getting love due to capital injections by Microsoft itself or a petitioning of particular developers by fans of the handsets. It doesn't matter if you have 10,000, 100,000, or even a million apps in your catalog: if you don't have the specific ones that users seek out, it is a tough roadblock to get past.

While Apple has thrived by selling essentially the exact same phone to its millions of fans, Microsoft has not found the same success in its relationship with the former Nokia devices division (which it now owns outright, and whose phones it continues to sell under the Lumia sub-brand).

Microsoft is a company that got huge by developing core operating system software, and letting manufacturing partners -- dozens of them -- build and sell the end products to consumers. That model has not worked very well in mobile, which has been a chicken/egg-type conundrum for the company and its would-be OEMs: manufacturers don't want to devote resources to building products which compete for a sliver of market share, and consumers don't want to devote themselves to a platform whose hardware choices are severely limited. (In the US, right now, you can find subsidized Windows Phones by Microsoft/Nokia, just a handful from Samsung and HTC, and...nothing from anyone else). Asians, especially, who are used to dozens upon dozens of Android makers to choose from, can hardly be blamed for overlooking the dearth of handsets running Windows.

According to Satya Nadella, successor to Microsoft CEO Steve Ballmer and responsible for reinvigorating/reinventing the corporation going forward, the new mantra is "Mobile first, cloud first." The company certainly has the software chops and networking know-how to become a major player in the SaaS arena, but its ability to succeed in the mobile space is murkier. It's been a little over four years since the introduction of Windows Phone 7, and while the improvements to the platform have been targeted in nature as well as vast in scope, Windows Phone remains a distant third worldwide, and especially in the most profitable domestic market, the US.

Redmond started out by using its own desktop/laptop model to distribute its wares; when that failed to gain much ground, it brought the manufacturing in-house much like its popular (and once near-death) rival, Apple. Nadella seems focused and energized, but it will take more than an optimistic CEO to move the needle. Despite shoring up some of its problems, Windows Phone still has a number of pain points -- some of the tangible ones can be solved by throwing enough money at them, but other, intangible issues (consumer misconceptions about the phones and their "status") are going to be much more difficult to overcome.

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