Thinking About Microsoft’s “Most Ultimate Mobile Device”

Posted on November 23, 2016 by Paul Thurrott in Windows Phones with 36 Comments

Thinking About Microsoft's "Most Ultimate Mobile Device"

Windows enthusiasts have found a lot to cheer in a recent interview with Microsoft CEO Satya Nadella. Not the least of which is a brief discussion of what he calls “the most ultimate mobile device.”

This interview is the same source for Mr. Nadella’s toasting of Apple CEO Tim Cook, which I wrote about yesterday. Today, let’s look at what is already an over-analyzed couple of sentences about Microsoft’s much-criticized phone strategy.

As you may recall, Microsoft announced its surrender of the smartphone market in mid-2015, when it wrote off $7.6 billion related to its Windows Phone assets and revealed that it would dramatically scale back its mobile operations. It then announced in March 2016 that it would further streamline its Windows phone hardware business by focusing only on business customers going forward. As part of that announcement, Microsoft said it would layoff more employees in its mobile business and record a charge against earnings.

But this week, Nadella seemed to indicate that he had some secret plan to reignite Microsoft’s smartphone business, at least according to some. And while enthusiasts are cheering these comments, it’s important to put them in perspective. That is, those comments—which I’ll get to in a moment—are not really all that different from what Mr. Nadella said in March. Which is this:

“We are focusing our phone efforts where we have differentiation, with enterprises that value security, manageability, and our Continuum capability,” Nadella said in a prepared statement. “We will continue to innovate across devices and on our cloud services across all mobile platforms.”

With that in mind, let’s look at what Mr. Nadella said this week.

When asked specifically about Surface phone, Nadella said that Microsoft “was not going to launch into a device category without bringing something different to the table, and was more interested in how individuals and organizations were using devices, than the devices themselves.”

Those are the words of the interviewer, the Financial Review’s Paul Smith, and not Mr. Nadella. But they echo what Nadella has been saying for some time: Microsoft cannot compete with Android and iPhone in the consumer smartphone space. And Microsoft is more interested in “mobility of experiences” than it is in having its own mobile platform. That is, it will continue to serve customers where they are, which in mobile is on Android and iOS.

That said, these comments also suggest that Microsoft would in fact “launch into a device category” as long it would be “bringing something different to the table.” And that is exactly what a Continuum-based Windows phone handset is today. It is also exactly what Nadella said back in March (as noted above). So this is no new information. There is nothing to see here.

But it continues.

“We don’t want to be driven by just envy of what others have, the question is, what can we bring?” he told Mr. Smith. “That’s where I look at any device form factor or any technology, even AI.”

That isn’t technically new either, as AI was a huge focus of September’s Microsoft Ignite conference. But it is a new bit of nuance to the phone conversation, and suggests that Microsoft feels it can contribute to the mobile market from an AI perspective. Today, this encompasses both back-end services, a Microsoft strength, as well as user-facing interfaces like Cortana and bots, which is currently more mixed from a success standpoint.

Referring to Microsoft’s role in HP’s Windows phone-based Elite x3, Mr. Nadella said that his firm provided “structural innovation,” which is to say Windows 10 Mobile generally, plus Continuum and the various supporting Microsoft services. And that Microsoft’s focus on mobile was “on productivity, management and security.” In other words, Microsoft is happy not to be at the center of the mobile platform, and will cede that spotlight to third parties, like HP. Remember, the Elite x3 focuses on the exact market that Nadella previously specified: “Enterprises that value security, manageability, and our Continuum capability.”

And then there is the quote that has everyone in a tizzy.

“We will continue to be in the phone market not as defined by today’s market leaders, but by what it is that we can uniquely do in what is the most ultimate mobile device,” he said.  (Emphasis mine.) “Therefore [with Nokia assets], we stopped doing things that were me-too and started doing things, even if they are today very sub-scale, to be very focused on a specific set of customers who need a specific set of capabilities that are differentiated and that we can do a good job of.”

My explanation of these comments is that nothing has changed, sorry.

That is, Microsoft sees “the most ultimate mobile device” as one in which Microsoft’s software and services innovations are present, and not in a Microsoft-branded device. That can be a device that runs on Microsoft’s mobile platform—a rarity—or it can be on a different platform.

And for its own mobile platform, Microsoft continues to focus only on “a specific set of customers who need a specific set of capabilities that are differentiated and that we can do a good job of.” Which is just another way of saying “enterprises that value security, manageability, and our Continuum capability.”

Granted, his words are open to interpretation, and there is no reason to suggest things can’t change, and improve. And I understand why these words would excite someone who is still looking forward to a Surface phone.

But if could add a bit more common sense to this discussion, it’s important to remember that even an x86-based Surface phone, or an ARM-based Surface phone that could run desktop applications as hinted at by this week’s rumors, doesn’t really solve the problem for Microsoft or for Windows phone fans.

That is, today’s Continuum solution is lackluster on two levels: You have a Windows phone that has no apps, and then connect it to a display, keyboard, and mouse, and create a pseudo-PC that, likewise, has no apps.

Adding x86 capabilities to the phone would solve half the problem: When docked, you could access the rich ecosystem of Windows desktop applications, a big plus. But when used as a phone, that device would still have no apps.

And that, alas, is a problem for which I see no solution.


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