A Way Forward for Windows Phones

Posted on February 15, 2016 by Paul Thurrott in Windows Phones with 0 Comments

A Way Forward for Windows Phones

“The phone that works like your PC,” as Microsoft says.

It’s been a tough year for Windows phone fans. But as time moves forward, we better understand the ramifications of Microsoft implementing the new strategy it announced last July. And I think we can finally see the way forward.

The key, I think, is understanding the differences between Windows phone, Lumia, and Windows 10 Mobile.

To understand why, let’s go all the way back to the beginning, which in this case is July 2015, when Microsoft CEO Satya Nadella emailed his blockbuster memo to employees. In that email, he outlined Microsoft’s new strategy for phones.

I am committed to our first-party devices including phones. However, we need to focus our phone efforts in the near term while driving reinvention. 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.

At the time of that writing, Microsoft’s (and Nokia’s) phones accounted for about 97 percent of all Windows phones in use. (And they still do.) But there it is, clearly stated: Microsoft will grow a “vibrant Windows ecosystem” that includes both third-party and first-party (Microsoft) devices.

A vibrant Windows ecosystem. Not “a vibrant Windows phone ecosystem.” But a vibrant Windows ecosystem.

That is the key, I think, right there. With Windows 10, Microsoft finally has a single operating system that really does scale to a wide range of devices, and not just PCs, tablets, and phones, but also IoT (embedded) devices, Xbox One, HoloLens, and Surface Hub.

This is a big change from previous Windows versions, where Windows has been all about PCs, and special and often very different and incompatible versions of the OS were created for other device types. The differences between “big Windows,” as I think of it, and those other “sort of Windows” products varied from generation to generation. But with Windows 10, finally, they really are all coming together for the first time. One Windows.

So the Windows ecosystem, as Nadella called it, isn’t just Microsoft and the PC makers. It’s also hardware makers of all kinds. Companies that make phones, Companies that make switches. Companies that make home automation products. Companies that make … Windows devices. Of whatever kind.

To grow this vibrant Windows ecosystem, Microsoft has to do what it has already done: Make a capable software platform with great developer tools and let device makers go to town with their own designs. Microsoft can and does create aspirational devices—Surface, HoloLens, Surface Hub, Xbox One, and even Band 2 all qualify—but it’s up to the software giant’s vaunted partner network to make it all come together.

So clearly, they’re going to apply this same model to phones. Arguably, they already have, and what we’re really waiting for is Mobile World Congress and an expected list of companies coming on board to make Windows 10 devices, many of which will be phones.

If we take Nadella at his word, Microsoft will for “the near term” create “better [phone] products” that have a narrowed focus on three customer segments “where Microsoft can differentiate”: Business customers, value phone buyers, and enthusiasts.

And they’ve just completed fulfilling this plan. The just-announced Lumia 650 is for business customers, the Lumia 550 is for value phone buyers, and the Lumia 950 and 950 XL are for the enthusiasts. We can quibble over whether any of these devices meet Microsoft’s differentiation goals , but whatever. They’ve done what they said they would do.

So I expect the rest of the year to go very differently.

Yes, Windows phones will limp along in the retail market for all the same reasons as before: There are no apps, few carriers promote these devices over iPhone or Android, and Microsoft’s “narrowed focus” results in less availability and visibility for the only Windows phones that were selling in any appreciable numbers. In this sense, Windows phone is what I said it was, a “zombie” platform. Not quite dead. But not quite alive either.

But Windows 10 Mobile, the new OS at the heart of these Windows phones, continues forward too because it is just another SKU, or product version, of Windows 10. It is the version of Windows 10 aimed at ARM-based phones, phablets, and mini-tablets, but there’s no reason to think that it couldn’t be used in other device types too. Asking whether Windows 10 Mobile is “dead” or “unsuccessful” is like asking the same of Windows 10 Home or Enterprise. It’s just another Windows 10 version.

I was thinking the other day about PC makers and the various products and models they offer. While a very select handful of PC models sell in the million-plus units realm, I bet most do far less business than that. And if you think about a phone, phablet or mini-tablet as being just another PC—as they are, in this Windows 10 generation—an image emerges of Windows 10 Mobile-based devices selling just fine, thank you very much, within that context. So when you think about rumored Windows phone designs from Dell or HP, or the phones we know are coming from Acer, it starts to make sense. Windows 10 Mobile is something these companies understand. It’s Windows 10 for tiny, very portable computers.

Which brings me back to Lumia. I see Microsoft further slowing down (if not completely winding down) its Lumia business in 2016, and while Surface phone remains a mystery—I’m still 50/50 on whether such a device ever gets released—the end game is still the same: Much fewer first-party (Microsoft) phone models in 2016, and a continued retreat from the retail market across the board. A premium Surface phone makes sense only because Microsoft makes aspirational devices for other markets. And such a thing would sell well … compared to other Surface devices.

Comparing Windows phone sales to those of the best-selling consumer-focused products like iPhone is always going to be disappointing. But in the scope of PCs and PC-like devices, Windows phones—and other device types based on Windows 10 Mobile—can in fact still be “successful,” a viable business on which all of the companies involved are profitable. It’s just not going to be successful on the scale of iPhone and, arguably, won’t even exist in the exact same market.

Is that enough? I think so. The one thing I keep reminding Windows phone fans—and in doing so, am in some ways just reassuring myself—is that no matter what the reason, Microsoft is keeping the Windows phone platform that I care about alive and is delivering new handsets. And I am really happy about that.

 

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