Microsoft Corporation is no longer running after the mass market for smart phones. Five unsuccessful years with the Windows phone has made the company realize it now needs to narrow its focus in order to thrive.
Microsoft’s latest decision reflects some hard facts. Windows smart phones failed to appeal, and the tech giant bled money. Some two years ago, when Microsoft Corporation decided to buy Nokia’s mobile segment, MSFT said that by 2018, it would own 15 percent of the smart phone market.
It is nowhere close to that mark. In fact, research firm IDC forecasts that this year only three out of every 100 smart phones sold will run on Windows. Android-powered phones and Apple’s iPhones are the clear winners.
No wonder then that Microsoft is now rumored to be gunning exclusively for the business market with its two new high-end Lumia phones. Both of these are set to be unveiled in New York on Tuesday. The firm is hoping it will have a distinct competitive advantage there.
Microsoft Windows 10 is the Linchpin
The key element in this plan is the recently released Windows 10 OS. The OS ties PCs and mobile devices into one seamless system. Microsoft insiders believe that PC users, who regularly crunch Excel sheets or make Skype calls, will find it rational to repeat the same experience on their smart phones.
Microsoft Corporation ’s expected launch this week will be its latest shot at a profitable mobile strategy. Microsoft mobile operations lost 12 cents on an average for every smart phone sold during the three months ending June 30. In July, the company finally wiped away almost 80 percent of the value of the $9.5B Nokia deal. 8000 jobs were also cut, mostly in its mobile phone segment.
CEO Satya Nadella says the decision to withdraw from the mass market should help the company operate “more effectively and efficiently with a more focused portfolio” of phones.
Will the Strategy Succeed?
Critics point out that Microsoft’s reduced ambitions are more a necessity than an informed choice. “They don’t have the demand to be big scale,” Mike Walkley, smart phone analyst at Canaccord Genuity said. “It’s almost where they had to go.”
Defenders however are quick to suggest that in Windows 10, the firm has a potent tool to revive interest in its smart phones. “Microsoft has a greater opportunity than people realize,” Forrester Research Inc. analyst J.P. Gownder said.
Analysts rooting for the revival, also allude to a precedent. Microsoft Corporation successfully managed to turn around its struggling Surface line of tablets. Once shunned by both reviewers and customers, the Surface product line now rakes in more than $3.6B in annual sales!