that the company would be scaling down its
mobile phone hardware business. Nadella called
the company’s dramatic course change a
“restructuring.” He used phrases like “effective
and focused” and “long-term reinvention and
mobility.” But make no mistake: Today’s
announcement (7,800 layoffs and a $7.6 billion
write-off, mostly related to Microsoft’s phone
business and its purchase of Nokia last year) is
a letter of surrender.
The battle for smartphone supremacy is over.
Actually, it’s been over for a while. It should
surprise no one that the smartphone market is
all but set in stone. Give Nadella some credit for
seeing the writing on the wall, though to be fair
it was basically written in huge letters and lit by
floodlights.
And give him yet more credit for working swiftly
to bring the company’s most indispensable
services, like Outlook and Word, to the devices
people already use—devices like the iPhone,
which now stands virtually alone at the top of
the smartphone heap. As Samsung, HTC, and
others have found, competing with the iPhone on
its own turf is pointless; even if you make a
phone as good, it won’t sell. Most people who
want that sort of phone just buy iPhones. You
can go big like the Galaxy Note 4, or you can go
different like the Galaxy S6 Edge, but the default
answer to the question, “which phone should I
buy?” is the iPhone. It just keeps winning.
The rest of the world—and the dramatic majority
of the market—has been completely overtaken by
Android phones, which have somehow managed
to get both cheaper and better, simultaneously
and at ridiculous speeds. The Moto E is terrific,
and it’s $129 unlocked. Companies most people
have never heard of, like Alcatel, OnePlus, and
Blu, make excellent phones almost anyone would
like. Microsoft makes a few phones that are even
cheaper, like the Lumia 520, which Microsoft has
said before was the best-selling Windows
product on the planet, period. But all you have to
do is look at the chart of price and quality of
Android devices, and you can’t help but think
we’re weeks or months away from a kickass,
$50 Android phone that no Lumia can hang with.
The Future of Surface
To be fair, Microsoft isn’t totally out of the
phone game. Microsoft will probably make a
Surface Phone, or something like it. Nadella even
teases the idea in his memo, mentioning giving
“Windows fans the flagship devices they’ll love.”
And Surface, by all accounts, is still important to
Microsoft. But whatever flagship device does
come out of Redmond is almost certainly going
to be something like Google’s Nexus program,
made not to sell in any volume but to give
developers something to build with. And,
hopefully, to inspire just enough envy in its
hardware partners that they build something
awesome. Don’t expect huge marketing
campaigns or gigantic global carrier rollouts.
Microsoft wants its partners to build hardware
that runs its software. That’s what it’s always
wanted.
It’s different now, though, than it was with PCs
in the ’90s. Android is free to use, it’s a
technically and aesthetically excellent operating
system, and it has unstoppable momentum
around the world. The same partners Microsoft
would need—HTC, Sony, Samsung, and LG—have
until now showed almost zero interest in the
platform, and this announcement doesn’t exactly
make it sound like there’s been closed-door
progress.
Even with the full force of Microsoft’s resources
behind making a dent in the market so
thoroughly sewn up by Android and iOS,
Windows managed only low-single-digit
smartphone market share. Now that it has so
ruthlessly and completely stripped away those
resources, how can it even pretend to compete?
It cant, and soon enough, it won’t. That’s a
huge problem for Microsoft, whose whole case
for Windows 10 hinges on its ability to be a
single platform across many devices—including,
critically, devices that fit in your pocket. If no
one builds Windows phones, and it now seems
safe to say no one is going to, then that whole
idea collapses.
What Nadella’s memo implies is that the
smartphone war may be over, but Microsoft sees
many more, equally disruptive revolutions upon
us. The company is also focused on the Internet
of Things, augmented reality, cloud processing,
and virtual assistants. Those things are the
future after phones, and Microsoft is positioning
itself well in all of those places.
Unless, of course, your phone isn’t about to go
away, but is instead about to become the
centerpiece of everything—the remote for your
lights and coffeepot, the engine for your virtual
reality experiences, and the microphone in your
pocket you use to talk to your assistant. That
looks more and more like the future that’s just
around the corner. And that’s a future without
much room for Microsoft.
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