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Microsoft's foray into phones was a bumbling, half-hearted fiasco, and Nadella always knew it

Why Redmond's CEO offloaded the business in an instant

By Michael Allison, 9 Oct 2017

Steve Ballmer as Microsoft chief executive bought the handset business of Finnish former smartphone giant Nokia in 2013. Satya Nadella, who took over from Ballmer in 2014, sold what Ballmer had bought just two years later.

That sale came nearly a decade after Ballmer laughed off the thing that promoted Microsoft's decision to buy Nokia's smartphones biz and thereby establish a foothold in the smartphone market in the first place.

Back in 2007, as Apple released its first iPhone, Ballmer fatally – as it turned out – couldn't conceive why anybody wouldn't be content simply owning a keyboard-driven feature phone running Windows. Or how the iPhone could upend Microsoft's phone business.

In his new book, Hit Refresh, Nadella reckons he actually voted "no" to his predecessor's proposed purchase of Finland's one-time leader in mobile phones. It was a catch-up play.

Due to a series of missteps, misfortunes and misjudgements, Microsoft left the mobile market, with nothing to show for it but broken partnerships and waning influence in an increasingly mobile-first world.

As Nadella tells it: "I did not get why the world needed the third ecosystem in phones, unless we changed the rules... But it was too late to regain the ground we had lost. We were chasing our competitors' taillights."

Microsoft's struggle with mobile will surely go down as another black mark on the firm's track record of coming late to market, of refining its product and of eviscerating the competition through a combination of product, pricing and channel and partner relationships. As the creator of the world's most widely used desktop operating systems and one-time browser king, it was inconceivable that Microsoft would be unable to similarly dominate the mobile market.

Yet, due to a series of missteps, misfortunes and misjudgements, Microsoft left the mobile market, with nothing to show for it but broken partnerships and waning influence in an increasingly mobile-first world.

A brief recap of Microsoft's mobile exploits seems appropriate at this point.

After the release of the iPhone and subsequently Android-based smartphones, Microsoft realised that its efforts to bring Windows to mobile were too enterprise-focused and clunky to survive in a post-iPhone world. In 2010, Microsoft announced the Windows Phone 7 series and followed it up with a partnership with Nokia in 2011. With the Lumia line as its flagship, Windows Phone quickly became hailed as the fastest-growing smartphone platform, quickly surpassing BlackBerry to become a somewhat popular third choice in the EU-5 region. To capitalise on that success, Ballmer pushed for a deal to purchase Nokia's Devices and Services division, which was deemed good for corporate synergy. Now Microsoft would design both the hardware and the software. Shortly afterwards, it all fell apart.

The first issue here was that Microsoft as a whole never really wanted to buy the division. Ballmer pushed for the purchase and essentially forced it through, but the shareholders were far from convinced.

As Nadella suggested, Microsoft would forever be third place in mobile even if it had continued striving. At that time, despite being the third largest ecosystem, Windows Phones still struggled to reach 4 per cent in the US, with its growth mostly powered by low-end handsets like the Lumia 520 and 521.

Always a me-too, never the bride

Now, thanks to Nadella's book, the gap between product launches begins to make some sort of sense. He reveals he didn't have any interest in Windows Phones unless there was some meaningful differentiation.

After Microsoft launched the Lumia 930 in 2014, it did not launch another flagship smartphone until the end of 2015, more than a year later. The 930 itself was not available in the US. If Microsoft were to launch another flagship, it would merely just another smartphone, albeit running Windows and its limited selection of apps.

It would not be meaningfully different and would, in fact, be just another me-too device. For Windows Phones to thrive, Microsoft had to have something that pushed the boundaries of what smartphones could do.

Microsoft's next problem, however, was that it was woefully uncreative when trying to differentiate its product. The initial launch of Windows Phone was different in UI and UX from iOS and Android, but remained inspired by the iPhone.

Microsoft prioritised speed and fluidity over functionality, and pushed for performance on less-powerful hardware. It controlled the experience and pushed certain aspects of the base experience like the People Hub, Photos Hub and Music Hub etc. to be fast and fluid. People wanted to use their phones to do more than they could do out of the box. They wanted to browse Instagram, use Snapchat, create documents in Google Docs and save interesting articles to Pocket.

With Microsoft's nascent app store lacking much interesting, it inevitably failed to catch on. Microsoft reasoned that instead of true mobile devices, what users truly wanted was hyper-productive desktop-like computing which could be done from a phone, and so the focus was placed on developing Continuum and Office Mobile. This would be the next step in mobile computing.

Keri Moran, Microsoft principal program manager lead, said here: "The thing is, today's phones have more than enough processing power to handle our most common tasks and activities. We knew this was especially true in emerging markets where people rely only on their mobile phones to get online. So — with these thoughts top of mind — we set out on our mission to help people get real work done with just their phone."

Moran concluded: "We realized that people embraced the idea of having a phone that could work like a PC."

Err, no they didn't

Thus, when Windows 10 Mobile was launched, a bevy of phones masquerading as computers came out alongside it. The Lumia 950, the HP Elite x3, the Acer Liquid Jade Primo are examples of just a few phones that pushed Microsoft's mobile computing vision. Unfortunately, this strategy – like the ones before it – didn't bear fruit.

Despite what Microsoft's research indicated, it turned out that in reality, not many people saw the need for a smartphone that could double up as a poor computer. Especially when you could purchase a cheap Windows PC or Chromebook and Android device for the price many of these devices were being sold for.

Overall, Microsoft's failure with Windows Phone was a failure to commit to one strategy and follow through. At the start, Microsoft wanted to both have its cake by pushing premium handsets, and eat it by flooding the market with low-end handsets. As a result, Windows Phone was never quite able to settle on what it wanted to be.

On the high end, Microsoft's slowness in adding support for the newest technologies meant that OEMs would never be able to get the specs they needed to be competitive with their Android counterparts. This was made painfully clear with the Lumia 1020, which despite its amazing 41MP camera, came out with a slow dual-core processor, and a 720p HD screen at a time when flagships like the Samsung Galaxy S4 were pushing quad and even hexacore processors paired with full HD screens.

Not only would Microsoft start from a position of considerable market weakness, it would have to win over all those fans and partners it has estranged while learning from its past mistakes.

The software, too, suffered from this failure to commit. Windows Phone updates were often slow, and basic smartphone features like storage management, rotation lock, as well as a notification centre weren't quite present. While Microsoft eventually got around to putting those features on the platform with subsequent updates, the fact that the OS was not quite as feature-rich as Android, yet not quite as polished as iOS, let it down.

Ultimately, the public didn't buy Microsoft's Nokia Windows Phones. Microsoft has yet to announce the death of Windows phone – and it may never. The firm didn't announce the death of Windows RT, opting to give it one final update. It buried the death its Groove Music subscription service under an ostensibly chipper headline announcing a partnership with Spotify.

Products allowed to wither never get a Redmond reprieve. Should, however, Microsoft decide that it does want to reactivate mobile then it has a long way to go.

Not only would Microsoft start from a position of considerable market weakness, it would have to win over all those fans and partners it has estranged while learning from its past mistakes.

A tall order. ®

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