What Satya (Really) Said About Windows Phone

With the past week’s cataclysmic events, I find myself in an odd position: I’m arguably one of the biggest Windows phone fans in the world, and yet I find myself at odds with other fans who want to believe, beyond all reason, that this platform has a future. Case in point: a recent interview with Microsoft CEO Satya Nadella, who has simply reiterated what I’ve been saying since last week. Not surprisingly, others don’t see it that way.

You can—and should—read the entire interview over at Mary Jo Foley’s All About Microsoft web site. When Mary Jo told me she’d be interviewing Nadella at WPC, I had just one request: “Make sure you ask him about Windows phone.”

She did.

In fact, it was almost all they talked about. So I will just focus here on the strategy stuff, since so many people seem to believe that Microsoft has refuted my original assertions. As you can see, they have not.

When asked if Microsoft was getting out of the mobile market, Nadella replied:

Not at all … I view the mobile opportunity, even today in its broadest sense, and in the future, as being richer. First, I want to be able to be present on every mobile endpoint. That’s a very explicit core goal.

Put another way, Microsoft doesn’t see mobile as its own mobile hardware or even its own mobile software platforms, but rather more holistically and including other mobile platforms. This is the mobility of experiences.

Today, of course, the high volume device is the six-inch phone. I acknowledge that. But to think that that’s what the future is for all time to come would be to make the same mistake we made in the past without even having the share position of the past. So that would be madness.

It’s unclear how he made this leap to six inch phones. (Microsoft/Nokia sold a six-inch phone, the Lumia 1520, in 2013. It sells a handful of low-end phablets today, like the Lumia 640 XL.) Based on his next comment, it’s pretty clear that what he means here is that Microsoft missed the phablet cycle, which is certainly true; it has essentially missed the entire smart phone cycle from a relevancy perspective.

Therefore, we have to be on the hunt for what’s the next bend in the curve. That’s what, quite frankly, anyone has to do to be relevant in the future. In our case, we are doing that. We’re doing that with our innovation in Windows. We’re doing that with features like Continuum. Even the phone, I just don’t want to build another phone, a copycat phone operating system, even.

Huh. On the hunt for what’s next. That’s exactly what I wrote, in This is How Microsoft Can Find Its Smart Phone Niche and, more generally, in Analysis: Microsoft is Scaling Back on Windows Phone Dramatically: having missed out on the smart phone generation, Microsoft must look forward to the next mobile innovation.

When I think about our Windows phone, I want it to stand for something like Continuum. When I say, wow, that’s an interesting approach where you can have a phone and that same phone, because of our universal platform with Continuum, and can, in fact, be a desktop. That is not something any other phone operating system or device can do. And that’s what I want our devices and device innovation to stand for.

Again, please refer to This is How Microsoft Can Find Its Smart Phone Niche. I wrote about this very specifically.

Last week’s announcement was not about any change to our vision and strategy, but for sure it was a change to our operating approach.

Actually, that is not true. In fact, Mr. Nadella’s email to employees explicitly said that it was a change to Microsoft’s strategy: “We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem that includes our first-party device family.”

I’m not going to launch a phone a day. I’m going to focus on a few phones that actually grab share that, in fact, showcase our uniqueness.

The notion of “grabbing share” refutes my assertion that Microsoft has effectively surrendered the smart phone market to Android and iPhone. But how does he plan to both “grab share” and no longer “grow a standalone phone business”?

When you have three percent share of that (phone market), but you also have a billion desktops, you have Xbox, you have innovation in HoloLens; you have Band. It’s a graph. It’s not any one node. It is the entirety of the device family. And I want to be able to think about our strategy, our innovation, and progress as one.

This is fair. But it’s not new. As I’ve been writing, Microsoft will continue making Lumia phones even if they never make any money for Microsoft. (Nadella says this below, too.)

The thing that I’m signaling most to the investors, to the employees is let’s stop this thing about trying to atomically dissect any one. They will all have a temporal current position and a future ambition. But it is one thing that we need to move on.

If anyone knows what “atomically dissect any one” means, please let me know.

But “temporal current position and a future ambition” is very clear: It’s what I wrote in Analysis: Microsoft is Scaling Back on Windows Phone Dramatically, that Microsoft short-term and long-term plans for mobile, and that short-term is to keep Lumia/Windows phone in the market, while long-term is mobility of experiences, where the device type you use simply doesn’t matter.

When prompted to think about Windows on mobile as more than just phone, i.e. as Windows Mobile, including small tablets and presumably other devices, Nadella said this:

Whenever I talk about Windows 10, I talk about mobility broadly across all of those devices.

If Windows phone were successful, I suspect he would talk about that explicitly, just as he and other Microsoft executives often tout the success of Surface. But I think it’s well understood that Windows Mobile isn’t just phone.

Speaking of which, Microsoft needs a Windows 10 Mobile-based Surface, doesn’t it?

For sure there is a form factor today which is the below six or seven inches, which is powered by a very specific operating system instance of Windows 10, which is Windows Mobile. But what do you call that (device) when you use Continuum and then you’re using applications on a big screen with a mouse and keyboard? It’s Windows 10.

I also call it a fairly niche usage scenario, but it’s a smart strategy because it is a real differentiator. Oh, right. I already wrote about that.

I like to think about Windows 10 as not being bound to any one form factor. What is Alex (Kipman) doing with a HoloLens? It was a Windows 10 UAP (Universal App Platform). I think is what we need to do a better job of communicating.

Again, I think his One Windows thing is pretty clear.

In my case I have a Band. I have my phone. I have my Surface. I have my Surface Hub and I’ll have a HoloLens. And that to me is all Windows 10. And I’ll seamlessly move between all of these. I want the notifications to flow between all of these. I want my data and apps to flow between all of these things.

Microsoft Band is not Windows 10. Will Band 2 be Windows 10? He seems to hint at that here.

In a bit of an informational repeat, Nadella is asked about Microsoft COO Kevin Turner’s email in which he also mentions that Microsoft must do with phone what it did with Surface. (Again, I wrote the exact same thing.) However, he offers up some interesting information that seems to have nothing to do with the question.

If no OEM stands up to build Windows devices we’ll build them. There will be Lumia devices.

Right. I wrote that.

We will do everything we have to do to make sure we’re making progress on phones. We have them. Even today Terry (Myerson, the head of Windows and Devices) reinforced, again, yes, we will have premium Lumias coming this year.

Terry Myerson mentioned Windows Phone during WPC but he barely touched on flagships (sorry, “premium Lumias”) when he said, “Soon you will see premium new Lumias designed for Windows 10.” That was literally all he said about this topic. A quick mention isn’t much of a reinforcement, but whatever.

If there are a lot of OEMs, we’ll have one strategy. If there are no OEMs, we’ll have one strategy.

Yikes.

I guess what he’s saying here is that Microsoft’s first-party phone strategy changes depending on whether the partners show up. If they don’t—and to date, they have not—then Microsoft will continue to sell a smaller selection of Lumia handsets than it does today.

We are committed to having the phones in these three segments. And I think the operational details will become clear to people as they see it. I want people to evaluate us on the phones that we produce, but not the inside baseball — what are we doing to produce — because that should not be relevant to our broad consumers. It may be relevant to people like you who are critiquing us. That’s okay. But what matters to me is what customers care.

…

Those three segments, I picked them because we have something unique to contribute. For people who love Windows, we’ll have a flagship device. It’s not just a flagship device, but it also supports things like Continuum.

To date, Microsoft has not supplied the Lumia handsets that its customers want and have been asking for. That is apparently changing. And I’m very eager to see the premium Lumia handsets planned for this fall.

Asked about whether the failure of Windows phone would impact the market for universal apps, Nadella had some interesting comments.

Universal Windows apps are going to be written because you want to have those apps used on the desktop. The reason why anybody would want to write universal apps is not because of our three percent share in phones. It’s because a billion consumers are going to have a Start Menu, which is going to have your app.

This undermines the point of “universal” apps. So … they’re just the new desktop apps?

Oh wait…

You start the journey there and take them to multiple places. Their app can go to the phone. They can go to HoloLens. They can go to Xbox. You talk to somebody like Airbnb. It might be more attractive, given our three percent share on phone, for them to actually build something for the desktop and for the Xbox.

The fundamental truth for developers is they will build if there are users. And in our case the truth is we have users on desktop … I want that to translate into success for our developers. That’s what’s going to get them to write to the phone.

OK, this makes sense. Write for the volume part of the market—the desktop—and then developers will see how easy it is to get their app on other device types.

If anything, the free upgrade for Windows 10 is meant to improve our phone position. That is the reason why I made that decision.

I love this guy, but come on: Satya Nadella just said that the reason—the reason—that Windows 10 is free was so that Microsoft can improve its position … in phones?

Sorry, but that is absurd.

If somebody wants to know whether I’m committed to Windows Phone, they should think about what I just did with the free upgrade to Windows, rather than — hey, I’m making four more phone models of value smart phones.

Fortunately, Mary Jo saw this for the baloney it is and questioned him further.

All of this comes down to how are you going to get developers to come to Windows. If you come to Windows, you are going to be on the phone, too. Even if you want to come to Windows because of HoloLens, you want to come to it because of Xbox, you want to come to the desktop, all those get you to the phone. It’s not about let’s do head-on competition. That will never work. You have to have a differentiated point of view.

This doesn’t not address the central untruth that Nadella decided to make Windows 10 free in order to improve the position of Windows Phone in the market.

Here’s how I would have worded this more honestly: By making Windows 10 a universal platform for apps, and giving it away for free, we are potentially improving the position of all devices that run Windows 10, including embedded devices, phones, HoloLens, Surface Hub, Xbox, and devices we haven’t even imagined yet.

It is disingenuous to assert that this was done only for phone.

Long story short, Satya Nadella didn’t really expand on what we already knew, nor did he really provide any new information beyond that last bit about Windows phone being the reason for the free Windows 10 upgrade. (Which, again, I simply cannot believe is true as stated.) This isn’t bad news: I think Microsoft is doing the right thing in mobile, given what’s happened in the marketplace. It’s doing what it can do, what it should do.

I would love to see a vibrant ecosystem of Windows phone handsets, but I see no reason to believe it will ever develop. Barring that, a smaller, more reasonable lineup of first-party Lumia/Surface phones is a great idea, if only to energize the base and provide partners, competitors, customers and even non-customers with something aspirational, something that shows how special Windows can be on this device type.

But none of this changes the facts: billions in write-downs and restructuring charges, and the resulting major change in strategy that includes not growing its own smart phone business. Less than 3 percent market share worldwide. A lack of important apps from Google, Apple and others that will prevent many (most?) people from ever even considering this platform, regardless of it other benefits. (And the second rate need for amateur replacement apps that only further sullies the platform.) The animosity of the wireless carriers, which openly steer customers toward other phones. On and on it goes.

I want to believe. But I’m not an idiot. And while I still love and use Windows Phone, I haven’t seen an actual ray of hope for this platform for quite some time. I’m glad Microsoft will keep pushing it in the face of these obstacles. But I’m also honest to myself and to you about what this really means. And I would just ask that you see this not as negativity, but rather as an understanding and embrace of reality. Things can change. I hope they do, for the better. I guess we’ll see what happens.