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Microsoft gives Windows phones one last shot

Gregg Keizer | July 13, 2015
But analysts see the US$7.6B write-off as a step toward an inevitable exit from mobile hardware.

Jack Gold, principal analyst at J. Gold Associates, agreed. "The issue for me was always, if Microsoft owns Nokia, why would others want to make Windows phones? You're basically telling your OEMs [original equipment manufacturers], compete directly with us," Gold said.

Dumping the Ballmer strategy

Nadella inherited that scheme from his predecessor, Steve Ballmer, who oversaw the launch of the Surface tablet line in mid-2012, trumpeted a pivot to a "devices and services" strategy later that year and in the next pushed through the Nokia acquisition during his final months.

While Nadella repudiated Ballmer's strategy within months of taking control, Wednesday's write-off of almost all of the Nokia acquisition was a much bigger walk-back, with the current CEO putting his firm's money, so to speak, where his mouth was.

Even if Nadella wanted to bury the phone business, he can't. Not yet. There's been too much work put into Windows 10 in general -- Windows 10 Mobile specifically -- too much expended on emphasizing the goal of a single OS that runs on all platforms, too many resources devoted to making it easier for developers to port existing Android and iOS mobile apps to Windows.

Really pull the plug and all that would have flushed away.

"The timing just doesn't seem right for abandoning either Microsoft's first-party phone business or Windows Phone as a whole," said Dawson on his research firm's blog, where he elaborated on his analysis.

In effect, Microsoft is giving its phone business and the inextricably-linked Windows 10 Mobile one more chance to change the narrative.

"What was the point of the deal?" asked Dawson. "Was it to buy another couple of years or was it about driving significant growth? If it was the former, then maybe it gave Microsoft time to launch Windows 10. They're clearly banking on Window 10 for mobile."

Too little, too late?

But many analysts, including Dawson, remain unconvinced that Windows 10 can pull Microsoft's mobile chestnuts from the fire. "I continue to be very skeptical of Windows future on smartphones," Dawson said, calling the challenges "insurmountable."

"It was a mistake to begin with, a monumental mistake," echoed Gold. "But give Nadella a lot of credit for stepping up and realizing that 'If we're going to be in mobile, where can we leverage it?'" Microsoft has already answered his question, Gold added. "Microsoft's goal is to provide the back-end services to all devices. You don't need a big phone ecosystem of your own for that."

"It's going to very, very hard for them," added Moorhead, who agreed that Windows 10 was a "last step, or close to the last step," for Microsoft.

If that's the case, what's the end game for Microsoft and its former Nokia assets?


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