Earlier this week, Microsoft announced more job cuts and another charge related to its disappearing mobile phone business. The company said it’s cutting 1,850 jobs and will take a $950 million charge. It also said it’s selling off its non-smartphone “feature phone” business — still about 20 percent of the US market but declining.
These announcements nearly bring to a close this chapter in Microsoft’s efforts to play catch-up with Android and iOS. As you recall, previous Microsoft CEO Steve Ballmer badly misjudged the mobile consumer market and stayed the course until it was arguably too far behind Apple and Google to succeed.
The Windows Phone operating system was introduced in late 2010 (three years after the iPhone), replacing Windows Mobile. Believing it needed to mimic Apple’s integrated hardware-software approach, the company later acquired Nokia’s mobile devices unit in late 2013 for almost $8 billion. Since that time, Microsoft has effectively written the entire acquisition off, taking an initial $7.6 billion charge last year.
Microsoft says it will continue to make phones for enterprises and support third-party OEMs that want to use its OS. However, based on limited consumer demand, those efforts are likely to be unsuccessful. The enterprise mobile and consumer markets are almost 1:1 now.
The company has, however, had success with its Surface laptop-tablet hybrid strategy. There have also been persistent if unconfirmed rumors of a “Surface phone.” So we’ll have to see if Microsoft tries to launch a new smartphone brand featuring Windows 10.
Current CEO Satya Nadella has committed to a mobile software strategy to embed or “colonize” iOS and Android devices with Microsoft apps. And while that seems to be working fairly well, it generates little revenue for the company. Most of Microsoft’s current mobile revenue is likely tied to patent licensing from Android OEMs.
Notwithstanding the demise of its smartphone business, the mobile market remains a critical one for Microsoft as PC sales continue to decline. Mobile devices are also part of larger ecosystem play that Amazon, Google and Apple are all pursuing (Amazon’s smartphone business also failed).
To that end, I suspect we’ll soon hear about a Cortana-powered standalone virtual assistant device from Redmond that will compete with Echo, Google Home and the forthcoming Apple assistant device.
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