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Smartphone lull a golden opportunity for Microsoft

Mikael Ricknäs | April 28, 2014
Critics have derided Microsoft's US$7.5 billion acquisition of Nokia's Devices and Services business but the deal may be closing at the perfect moment -- during a slowdown in smartphone innovation.

Two months ago at Mobile World Congress, Microsoft announced support for Qualcomm's Snapdragon 200 and 400 processors, which open the door for cheaper devices. It also announced nine new Windows Phone partners, including Foxconn, Karbonn, Lava, Lenovo, Longcheer and ZTE, which are expected to make low-priced Microsoft phones a reality.

"When we announced these new partnerships, I think it's fair to say that the ink wasn't quite dry. That was the beginning and a little over a month later, April 2, [Windows Phone Program Management manager] Joe Belfiore held up a couple of prototype devices from a couple of those manufacturers running our software already," Sullivan said.

Microsoft's recent decision to license Windows Phone for free will also make it easier for partners to launch low-cost devices.

Exactly when the products will start shipping is up to the vendors, but they will show that Windows Phone offers better performance on low-cost hardware than Android, according to Sullivan.

"The idea that you don't have to sacrifice the user experience just because you chose an affordable device is a big advantage for our platform, and one we plan to extend," he said.

With the acquisition, Microsoft also gets Nokia's new X smartphones, which are based on the Android Open Source Project software and were also announced at Mobile World Congress. The X family's existence is a sign of frustration on Nokia's part and symbolizes Microsoft's inability to lower the cost of Windows Phone.

Selling Android-based smartphones probably isn't what Microsoft wants to do, but there are redeeming factors. The interface on the X, X+ and XL has been designed to look like Windows Phone, with tiles that can be resized. The thinking behind that is to make it easier for users to upgrade to a device that runs Microsoft's OS. Also, the Google services available on Android devices have been replaced by Microsoft services such as Skype, Outlook.com and OneDrive for hosted storage.

"I suspect in the short term Microsoft will put up with the X family, because it looks like it's going to be relatively popular. It will be a good way of getting the Microsoft user interface down to lower price points, and give Google a bit of a jab in the ribs," Mawston said.

As long as there is a price gap between the low end of Windows Phone and X family, backing the latter makes sense, Wood agreed.

"Otherwise Microsoft is just leaving money on the table. But if it can get Windows Phone down to the same price point or if the X phones starts to look like it's cannibalizing the low end of Windows Phone, decisions have to made quickly," he said.

 

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