Microsoft to preinstall more apps on Android with Dell partnership

25 Mar 2015 | Author: | No comments yet »

Microsoft CEO Nadella partners with his enemy’s enemy.

NEW DELHI: Samsung will begin making its Galaxy S6 and Galaxy S6 Edge smartphones in India within the next quarter, after similar plans for its Tizen-based phones, as it pins hopes on the latest smartphones to consolidate its position in the world’s fastest-growing market in this segment.SAN FRANCISCO — Samsung’s decision to start pre-installing Microsoft Office apps on some tablets would seem, at first glance, to be more of a short-term win for shareholders of the U.S. software giant than owners of the Korean mobile device maker. Given the fatter profit margins in software, any market share growth that may come from the deal would boost the bottom line of Microsoft more than Samsung. Samsung and Microsoft, fresh off the battlefield from a patent skirmish, have made peace and are partnering to bring more Office apps to Android devices.

Yet the details of the agreement announced Monday shine a light on the biggest challenge Microsoft CEO Satya Nadella faces as he begins his second year at the helm: Trying to protect a market lead during a major technology transition, as productivity software programs used on workplace PCs are replaced by mobile applications. The most prominent of those deals is with Samsung, the largest maker of Android devices, which plans to ship Office, including Word, Excel, PowerPoint and OneNote, on some of its tablets during the first half of this year. Samsung’s plans to set up a third local manufacturing unit and to make the Z1 — the first smartphone on its own operating system Tizen targeted at entry-level segment — fit in with the company’s local production strategy.

That market reality is why Nadella, a veteran insider of the tech giant, is willing to distribute for free what the company has traditionally charged a hefty price for. Samsung also essentially pre-announced the Office partnership with Microsoft, as an executive claimed it would be marketed as part of its KNOX security solution for phones and tablets. Companies that sign up for Samsung’s “business-to-business sales channels” will gain access to Office 365, Microsoft’s Web-based suite of programs. The news follows Samsung’s decision earlier this month to pre-install Microsoft’s Skype video-calling software and several Internet-based business applications on the Galaxy S6, its latest smartphone.

Office 365 Business, Business Premium, and Enterprise will operate using Samsung’s KNOX Business Pack, a security feature that makes it safer to switch from professional to personal accounts. Thanks to these agreements, Nadella will have Office apps and so-called cloud services on devices built by the 2014 global smartphone leader within a few months. For Samsung, the benefits of the partnership are less clear, unless the company believes consumers will buy more Samsung phones because they come with Microsoft Office. Samsung that had a 22% market share in the smartphone space in the quarter to December, according to IDC, will separately invest Rs 517 crore in expanding its Noida facility.

There is no word on if the smart phones will get the Microsoft Office experience, but owners will have access to 100 GB of additional free cloud storage for two years on OneDrive. While that could prove true someday, a more likely benefit in the near term is whatever amount of marketing dollars Microsoft may be willing to pay to get on the home screen of Samsung devices. The local manufacturing plans also come together with the government’s ‘Make in India’ campaign, which it is using to encourage local manufacturing and employment. “By making in India, any company will get a 9-10% advantage on cost as the import duty on devices has been raised to 11% but there’s no duty on components,” said a senior executive, explaining the benefits that a local phone maker has over others that import mobile phones. The bummer for Microsoft investors, though, is that the company is being forced into a so-called “freemium” model, where basic functions of the software are given away and users pay only for special features. The new Microsoft is doing everything it can to get Office into the hands of people on those devices. “It goes to show we are truly reinventing ourselves,” Peggy Johnson, executive vice president for business development at Microsoft, said in an interview.

Microsoft has had trouble gaining traction in the mobile market, but its multiple partnerships with Android devicemakers should give it more exposure. In porting Microsoft apps over to the two major smartphone platforms, Nadella has essentially blanketed the market for productivity-software apps sold (or given away) to mobile consumers. It’s a bold grab for the loyalty of business-minded users, yet it comes in a smartphone market where the dominant operating systems are Google’s Android and Apple’s iOS, not Windows.

The flipside, however, is that Android users, long used to living without Office, may see its sudden appearance as bloatware, even if they can uninstall it. Screenshots uploaded to the XDA Developers forum last week showed that a user can disable or delete almost any app, including Samsung’s S Health and S Voice and several Google apps such as YouTube, Gmail, Google+, and even the Google Play Store.

That lack of market power – combined with the prevailing belief among mobile consumers that apps should be free or nearly so – helps explain Nadella’s pricing strategy. The prices undercut iPhone 6, which was launched in October atRs 53,500 and iPhone 6 Plus, which had a sale price of Rs 80,500 in 16 GB, 64 GB and 128 GB versions. A little over a year ago, Satya Nadella took the CEO chair at Microsoft promising a “mobile first, cloud first” mission that would use software to tie devices together. When a long-term market transition happens in a core market, profit margins are headed south, and the Office franchise has been a major cash cow for Microsoft for more than two decades.

This will create a duopoly with Samsung and Apple in the super-premium segment and will double volumes in this category from 1 million units a quarter,” said Tarun Pathak, senior analyst at Counterpoint Research. Yet they’ve also bounced off near-term lows, suggesting some Microsoft bulls have kept faith that Nadella can find a way to one day make a profit on software that he’s now giving away. It is, however, a bit riskier for a company like Microsoft with a colossal, mature software franchise like Office, one that brings in billions of dollars in revenue a year. Interestingly, a report on the XDA developer forums that surfaced recently says that Samsung is getting rid off most of the annoying “Samsung” and “Galaxy”-branded apps on the S6 and S6 Edge, a response to customers who didn’t have any use for the apps and couldn’t uninstall them. Following the Superfish debacle at Lenovo, PCWorld dug into the software preloaded on many retail PCs, determining the worst PC makers for shipping bloatware.

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