Microsoft’s mobile strategy unclear in post-Nokia world

If you’re one of the few Microsoft phone users left here in Canada, you can stop panicking – for now.

COO Kevin Turner closed out this week’s Microsoft Worldwide Partner Conference (WPC) in Orlando by finally addressing the elephant in the room: is Microsoft killing its phone division?

As IT World Canada’s Paolo Del Nibletto reported in Computer Dealer News, Turner said Microsoft isn’t ditching its phone unit entirely, but it is significantly dialing it back.

“Microsoft is not giving up on phone but we are resetting for profitability and growth,” Turner told the 12,000 channel partners in attendance.

That means focusing on only a few “killer” handsets that can carve out a niche in the crowded market rather than offering several phone hardware options, he said.

The move isn’t a big surprise given Microsoft’s tiny piece of the smartphone pie, said Sanjay Khanna, senior mobile phones analyst at IDC Canada.

“In Canada, Windows Phone isn’t a big player. Last year Windows Phones represented about 1.7 per cent of shipments of all mobile phones in Canada. So that’s not a huge division (of Microsoft),” Khanna said.

Sanjay Khanna, senior mobile phones analyst at IDC Canada.
Sanjay Khanna, senior mobile phones analyst at IDC Canada.

IDC data shows that consumer handsets represented 95 per cent of all Windows Phone units shipped in Canada during 2014 while the remaining five per cent were commercial units, Khanna said.

Turner didn’t go into more specific details about the future of Microsoft’s own Windows Phone or its Lumia phones line, which Microsoft purchased when it acquired Nokia for $7 billion last year. But Microsoft gave some strong hints last week, announcing a $7.6 billion writedown on the Nokia deal and up to 7,800 job cuts, mostly in its phone operations.

“I frankly haven’t heard a lot about the strategy for Lumia,” Khanna said. “But one can certainly make a case that, given the decline in resources overall that they’re going to have, Microsoft won’t want a very extensive (Lumia) portfolio … not as extensive as they have today.”

Khanna said there’s also been speculation that Microsoft will introduce a brand new smartphone blending features from the Surface tablet into a handset format in order to “showcase what would be possible on a Windows operating system.”

So what should Canadian users of Windows and Lumia phones do at this uncertain stage? Some will likely wait and see if that rumoured new Microsoft device makes its debut, Khanna said. For those who want to move on to an Android, BlackBerry or iOS phone, he laid out the factors they should carefully consider.

“I think it depends on what the longer term needs of that user are, how much data they have on their device and how they feel about the other operating systems they’re on (with their other devices). I certainly think that if I were a consumer, I would want to make sure I was having the user experience I wanted to have and had the support that I needed,” Khanna said.

Other thinking points he listed include price, form factor, app use and interoperability with workplace devices. Notably, there were only about 527,000 apps in the Windows App store (340,000 of them for Windows Phone) as of last September. As of May 2015 there were 1.5 million Android apps and 1.4 million iOS apps.

One Canadian Microsoft channel partner came away from Orlando feeling relieved that the company is finally stating the obvious.

“I think Microsoft has recognized, ‘Hey, we can’t buy our way to success with this (phone) program.’ So they’re trying to downsize it,” said Ralph Loewen, president of Itergy, a Montreal-based firm that provides Microsoft cloud, hosting and data centre services.

Microsoft's move to retool its phone unit "makes sense," says Itergy president Ralph Loewen.
Microsoft’s move to retool its phone unit “makes sense,” says Itergy president Ralph Loewen.

“As a business person, I say that makes sense,” said Loewen.

He welcomes Microsoft’s acknowledgement that “they’re not going to dominate this space on the hardware side.” For him, the new push to get Microsoft software onto Android and iOS devices is a more realistic strategy with higher growth potential.

“It used to be at WPC that they would only talk about Windows Phone and you’d never see an iPhone, for example. But in the (Orlando) keynote sessions they were doing demos using iPhones with Windows on them. That was a refreshing change for me as a partner,” Loewen said.

“When you’re a partner, you don’t like to see organizations get obsessed with something that doesn’t drive value,” he added. “Invest in areas where you’re successful.”

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Jim Love, Chief Content Officer, IT World Canada

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Christine Wong
Christine Wong
Christine Wong has been an on-air reporter for a national daily show on Rogers TV and at High Tech TV, a weekly news magazine on CTV's Ottawa affiliate. She was also an associate producer at Report On Business Television (now called BNN) and CBC's The Hour With George Stroumboulopoulos. As an associate producer at Slice TV, she helped launch two national daily talk shows, The Mom Show and Three Takes. Recently, she was a Staff Writer at and is now a freelance contributor.

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