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With Microsoft Layoffs, Windows Phone's Prospects Dim Further

Redmond wasn't gaining much ground even going after the phone market full throttle. It's hard to see how it will be able to do so with fewer resources.


It’s hard to see Microsoft’s massive phone layoffs leading to something other than an eventual exit from the phone business.

That’s not Microsoft’s Plan A, of course. In his memo, CEO Satya Nadella talks about focusing on the low and high ends of the market as well as catering more to business.

“We plan to narrow our focus to three customer segments where we can make unique contributions and where we can differentiate through the combination of our hardware and software,” Nadella wrote in the memo. “We’ll bring business customers the best management, security and productivity experiences they need; value phone buyers the communications services they want; and Windows fans the flagship devices they’ll love.”

But Microsoft has made very little headway with Windows Phone even going full throttle and spending billions to acquire its largest partner. It’s tough to see Microsoft gaining ground in the coming year or two by devoting far fewer resources to the phone market at a time when lots of other companies are struggling, even by putting everything into the business. And counting more on partners is a risky strategy as hardware makers have generally devoted only modest resources toward Windows models, with many deciding after a device or two that even that wasn’t worth the trouble.

The phone business is a brutal one with little place for runners-up. One need look no further than HTC, which was once among the leaders in the market, but now finds itself gasping for air despite consistently churning out well-regarded devices. BlackBerry is arguably the best in the business-oriented space but that hasn’t been enough to give it a significant slice of the phone hardware market at a time when even many business people buy their own phones.

Nadella was wise to hedge Microsoft’s bets by bringing key programs and services to rival mobile platforms. At the same time, that move took away one of Microsoft’s selling points. Until recently Windows Phone was the only place to get mobile versions of Office or other key Microsoft services. Committing to other platforms was the right choice for Microsoft as a whole, but makes the job that much harder for Terry Myerson and the team in charge of trying to get people to buy a Windows-based phone.

Right now Windows has about 2.7 percent of the global market, according to IDC, though there are a few places in Europe and Asia where it holds closer to a double-digit share.

Microsoft’s last best hope is Windows 10. And there is at least some reason for optimism on that front.

One of Microsoft’s big challenges has been getting developers to write apps given its paltry market share.

With Windows 10, developers get a little more bang for their buck in that they can write universal apps that, with only modest effort, can run on PCs, phones and tablets. And Microsoft continues to sell a lot of PCs each year, which means that within a short period of time there is a pretty large market to go after — Microsoft has promised a billion devices running Windows 10 in three years.

The company has also promised it will finally bring a much needed flagship to its lineup. Windows hasn’t really had one for a couple of years now since the Nokia Lumia 1020 with its 42-megapixel camera. The Lumia 1520 phablet was also a highly capable device, but its giant six-inch screen meant it wasn’t really in competition with the iPhone and Samsung Galaxy S series.

Microsoft has taken steps to make it easier for iOS and Android developers to bring over their apps to Windows Phone. That makes it easier for those with an interest in doing Windows Phone apps to do so, but probably won’t sway those with little interest in supporting another operating system.

At the end of the day, Microsoft still has to convince someone walking into a store to walk out with a phone running Windows versus an iPhone or one running Android. It needs compelling products that are demonstrably better than the well-heeled and successful competition. How it gets there is anyone’s best guess. What is clear is that today’s news brings it no closer to reaching these goals.

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