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Microsoft exec: Forget the past

Gregg Keizer | July 20, 2015
COO Kevin Turner says it 'feels so good … not to be yearning for something we don't have,' alluding to the retreat from a broad-based smartphone strategy.

Microsoft COO Kevin Turner
Microsoft COO Kevin Turner Credit: Microsoft

In a revival tent-like speech Wednesday, Microsoft's chief operations officer Kevin Turner urged the company's partners to forget the past -- an allusion to the failure of its smartphone business to gain meaningful share -- but defended the decision to keep making handsets.

"It feels so good, ladies and gentlemen, not to be yearning for something we don't have," said Turner during a long keynote that opened the third day of Microsoft's Worldwide Partner Conference (WPC) in Orlando, Fla. "We have what we need. And if there's something we need, it's coming. That is a beautiful thing."

In other words, don't weep over the spilled milk of opportunities lost.

Turner made that explicit a moment later.

"This is the moment," he continued after his "not yearning" comment. "This is the time that we have to pull together, work together. We have to be in this moment. We have to find the joy in that moment."

While Turner didn't breathe the words "phone" or "smartphone" during that bit, he was clearly talking about what Microsoft suddenly does not have: A broad smartphone portfolio.

That went away last week, when Microsoft wrote off $7.6 billion of the 2014 Nokia smartphone business and patent licensing deal. Simultaneously, it announced another round of layoffs that will push 7,800 employees out the door by mid-2016.

CEO Satya Nadella also explained an accompanying change in the firm's smartphone game plan. "We are moving from a strategy to grow a standalone phone business to a strategy to grow and create a vibrant Windows ecosystem including our first-party device family," he said in an all-hands email. "In the near-term, we'll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility."

Analysts interpreted the strategy switch as, in the short term, a paring of the smartphone portfolio. Long-range, they said it signaled one of the last steps before inevitably exiting the smartphone hardware business.

Not surprisingly, Turner didn't touch on an exit plan -- after all, this was a sales conference, Turner is Microsoft's top salesman, and there's no gain in admitting a sales defeat. But he did spell out what last week's changes mean for his operations bailiwick.

"We care about phones, we are still in phones," Turner said. "We're not giving up on phones, we're resetting for profitable growth." To do that, Turner added, Microsoft will be "focused on a few killer devices to grab share" and showcase its services and software, particularly Windows 10 Mobile, the smartphone/small tablet OS that will launch later this year.

At least in general terms, that's the same strategy Microsoft has expressed, and executed, for its Surface line of it's-a-tablet-it's-a-notebook devices. Although 2014's Surface Pro 3 has been called a winner by many reviewers, the line has yet to break even after operational expenses are factored in. Microsoft has never divulged unit sales figures for the Surface -- gross revenue only -- but analysts have pegged the number at 1 million or under each quarter.

 

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