The Long, Slow Decline of Windows Phone

Posted on January 31, 2016 by Paul Thurrott in Windows Phones with 0

The Long, Slow Decline of Windows Phone

To some, Microsoft’s recent quarterly financial results indicate that Windows phone, finally, is dead. To others, nothing has changed, and Windows phone will continue to limp along as before. The truth, as always, is a bit more nuanced.

That is, Windows phone didn’t just die, it officially died last July. And while it’s fair to say that Windows phone will indeed continue to limp along regardless, it’s not fair to say that nothing has changed. With every passing day, Satya Nadella’s inevitable decision for Windows phone becomes closer. And clearer.

Microsoft conceded the smart phone market to Android and iPhone last July when Mr. Nadella wrote an open letter to employees explaining that it was time to “fundamentally restructure its phone business.” The company said it would take an impairment charge of approximately $7.6 billion related to assets associated with the acquisition of the Nokia Devices and Services business in addition to a restructuring charge of approximately $750 million to $850 million. So over $8 billion flushed down the toilet, and that’s only in direct costs related to Nokia/hardware. Microsoft had been losing money—and losing generally—on Windows phone all along.

In my analysis of this dramatic change, I explained the following:

Windows phone is a failure. When I wrote that, Windows phone usage had fallen to 3 percent. Today, that sounds like a heady figure: Windows phone market share, just 6 months later, is only 1.1 percent.

The Nokia purchased was a total loss. Had Microsoft not purchased Nokia, it would have tried its hand at Android phones and failed anyway. But in buying Nokia, Microsoft simply prolonged the inevitable. And by not that much time, as it turns out.

First party phones are a short term business only. Nadella said that Microsoft would “no longer attempt to “grow a standalone phone business,” meaning that its own (Lumia) phones don’t matter to the firm anymore. “Nadella has zero plans for Lumia hardware to ever make any money for Microsoft,” I wrote at the time. “And that means lots of scaling back.” That has of course happened.

Lumia will be kept in the market artificially to buy time. No longer pushing to compete with Android and iPhone, Microsoft could focus on serving fans (with the flagship Lumia 950 and 950 XL that no one seems to even like), value phone buyers (with the Lumia 550) and business customers (with the coming Lumia 650). None of this is designed to make money. Instead, the plan was to lose less money as the market naturally contracted. Which of course it did.

Microsoft’s long-term plans for mobile has little to do with Windows phones. “In the longer term … our reinvention will be centered on creating mobility of experiences across the entire device family including phones.” In other words, even Microsoft’s long-term plans don’t involve its hardware making money. They hope to make money in other parts of its ecosystem, and phones are just a part—a very small part—of that strategy. This, too, speaks to keeping Windows phones limping along. But as I wrote at the time, “Today, Microsoft’s customers are not using Windows Phones. They won’t be in the future either.” Today, just 6 months later, even fewer of Microsoft’s customers are using Windows phones. The strategy, such as it is, is working.

Like Germans hoping for a secret “super weapon” to turn the tide of World War II in its end stages, Windows phone fans have again pinned their hopes on some future miracle that will save the platform. Two key pipe dreams emerge.

Continuum. Many point to Continuum, which I early on had pushed as a way to differentiate to differentiate Lumia/Windows phone in a Surface-like way. (Though this makes no sense until/unless Intel x86-based phones appear.)

Surface phone. Many also point to a presumed/rumored Surface phone, though here I can rightfully claim to know as much as anyone. Which is to say almost nothing: I believe we’re reaching the point of no return on a such a device, which would pointlessly drag down the Surface brand.

Neither of these things are an answer to the real problems with Windows phone: The complete and utter lack of meaningful apps that literally billions of people now rely on every day. And the fact that Windows phone’s vaunted user experience—which I do see as the platform’s one remaining major advantage—has never prompted a migration of any kind from the less well-designed Android or iPhone/iOS. In other words, Windows phone fails where it matters, and it succeeds where it does not matter.

This isn’t negativity, folks, it’s the truth. And for every person out there who can make the semi-hysterical and claim, sputtering that “well, Windows phone is just fine for me, thank you very much,” I will point to the hundreds of millions of people who disagree with you. And, sorry, find you sort of sad. (No worries, I’m right there with you.)

I am no general fan of Android or iOS, and I still love Windows phone, and prefer it for that user experience. But if you dive deeper than that surface veneer, you find a wasteland. And in using rival smart phone platforms—which, I’ll remind you, I’ve been doing regularly for years across dozens and dozens of devices—you only see the ever-widening chasm. Yes, the whack-a-mole, grid-of-icons “UI” in Android and iOS is … stupid. But that does not matter in the slightest. To 99 percent of the smart phone-using world, apps are the UX, not the icons. Sorry.

Barring a miracle from Surface phone or Continuum, what’s the future look like? Grim, I think. Last July, I voiced the thought that July 2016 would be pretty interesting, given what happened in July 2015, and that those dates coincide with the start of a new Microsoft fiscal year. It’s the right time to make a big change, like a New Year’s resolution for a corporation. Will Microsoft simply give up on Windows phone entirely this July? Or by this July?

It’s possible, of course, but I don’t think so. Don’t take that as a ray of hope: It’s more likely that Microsoft will keep Windows phone limping along in new ways, by not releasing many more actual phones in 2016, and by pushing the new OS, Windows 10 Mobile, to non-phone devices like mini-tablets, where Continuum and x86 make much more sense.

And I think that’s how Windows phone really ends. Not in a blaze of glory, but in a limping, sad, inevitable, and inexorable decline. For fans of the platform—for me—it’s like watching a loved one slowly succumb to disease. It’s hard. And it hurts. Because Windows phone was—and, still is, to a much lesser degree—something special.

As I do so often, I look for clarity here, but I see none. Windows phone is dead, but it’s sort of not dead. Nothing has changed … but everything is changing. I still love the thing. But I cannot recommend it to others with a clear conscience. Ultimately, it’s just sad. And that’s not the way I wanted it to end.