Windows 10 Signifies Microsoft’s Shift in Strategy

20 Jul 2015 | Author: | No comments yet »

Lumia 950 and 950 XL Rumored To Be Next Microsoft Flagship Devices.

SEATTLE — Next week, when Microsoft releases Windows 10, the latest version of the company’s operating system, the software will offer a mix of the familiar and new to the people who run earlier versions of it on more than 1.5 billion computers and other devices. In an interview given to ZDNet.com, Microsoft chief executive officer Satya Nadella, confirmed the release of new Windows 10 ‘premium’ Lumia models before the end of 2015.

Analytics company Argus Insights has posted a report on the US smartphone market in Q2 2015 and reports that customers who purchased a new Microsoft-branded smartphone are the most delighted customers, with a significant rise compared to Q1 2015.From being a small time Finland based company to seeing a global expansion to becoming the uncrowned king of a global empire, and from there to its fall, and to its ultimate demise, Nokia has been through all major phases of existence of a company, and has managed to do respectably well in all of them. There will be a virtual assistant in the software that keeps track of users’ schedules, and Microsoft will regularly trickle out updates with new features to its users over the Internet. In the midst of shifting away from Nokia branding, Microsoft saw an increase in delight from the few consumers reviewing their Microsoft Lumia 640 and the Microsoft Lumia 535 handsets, crowning Microsoft as the most delightful of the quarter. This strategy did not work out for them and Nokia ended up accounting for 7.8Billion dollar worth of losses and resulted in almost 7800 people losing their jobs.

Let’s take a look at this past week and see what big Windows 10 Mobile news story took place in a feature we like to call “Windows 10 Mobile news recap.” Earlier this week we learned that the Redmond-based company is expected to launch a new flagship Windows 10 Mobile handsets in the coming months, possibly at the IFA 2015 in Berlin, but it seems there are more handsets in the pipeline running the new operating system. Argus Insights continuously monitors and analyses millions of consumer touchpoints with their patent pending technology to measure the degree to which products satisfy market demand. While many people are sad over the fate of Nokia, their faithful friend for almost a decade, little do they realize they have contributed towards killing Nokia. Through curated analysis of global consumer reviews and social media conversations, they provide comprehensive visibility at market, product, and attribute levels to determine what is delighting and disappointing the market.

While Microsoft has been planning big events for the launch, the company is preparing for market backlash as the competition will be very fierce as the costlier windows phones, the leading model for the Microsoft Mobiles, will be equivalent in cost, if not equal to the price of the other phones releasing on similar timelines – the Samsung Galaxy Note 5 and the new Apple iPhone (iPhone 7). He didn’t go into much details about the handsets, but we can take this with a pinch of salt considering the good reputation of @evleaks when it comes to unannounced products. While at one point of time, Nokia was the biggest name and the only logical choice when one had to buy a new phone, the name today has become obsolete and is now re-branded as Microsoft Mobiles after it was purchased by Microsoft after making big losses.

The same source describes the Lumia 940 with a 5.2in screen (1.920×1.080 pixels), a Qualcomm Snapdragon 808 processor, 3GB of RAM, 32GB of internal memory and an expandable micro SD card. The company has seen somewhat higher numbers in some European markets, but there has been evidence that even those relative cratonic bastions have eroded in recent quarters. They are founded on the belief that delight leads to improved sales in the future, and we hope for Windows Phone’s sake this is indeed the case going forward. However, new rumors are stirring speculation that Microsoft will skip the 940 models all together and release their next flagship devices as the Lumia 950 and 950 XL.

Companies like Google have crept into Microsoft’s business with free software and services subsidized by its huge advertising business, while Apple in recent years has made upgrades to its applications and operating systems free, earning its money instead from hardware sales. Whatever happens, Microsoft can ultimately never walk away from mobile because giving up would essentially be ceding a massive portion of the future of computing, and it simply can’t afford to do that. Nadella argued that Microsoft is not leaving the mobile market, rather the company will focus on a few phones that can showcase the uniqueness of Windows 10. After some time in the soup, Microsoft has finally detailed its Windows mobile strategy well enough in the last week that we can understand it — whether that’s referring to the operating system level, hardware or cross-platform apps. Leaning on Mary Jo Foley’s excellent interview with CEO Satya Nadella, and the write-down, we can come to the following conclusions: “[T]he free upgrade for Windows 10 is meant to improve our phone position.

These two countries have been some of the biggest markets for the Windows based phones and Microsoft wants to enter into long term partnerships with local players. If somebody wants to know whether I’m committed to Windows Phone, they should think about what I just did with the free upgrade to Windows, rather than — hey, I[‘m] making four more phone models of value smart phones.” That’s quite plain: Microsoft wanted to go after phone market share in the long term, and selling Windows at its old price points would limit broader Windows 10 adoption, eroding at the company’s larger value proposition of having one platform across all your devices.

Other new functionalities announced include the use of biometrics for facial recognition or fingerprint technology as well as the introduction of Cortana, a virtual personal assistant and a revamped Windows store. The company’s last operating system, Windows 8, did not revive the market and might have made matters worse with a bold redesign of its interface that turned off some users. It is about the overall health of Windows and being grounded in any given day’s reality, but having ambition of where the market is going versus being bound by current definitions.” Again, that’s simple enough. Windows ships on less than 3 percent of the smartphones sold globally, with Google’s Android and Apple’s iOS accounting for most of the rest. “Consumer Windows is fighting for relevance in a world where Apple and Android are the dominant OSes,” said Bill Whyman, an analyst at Evercore ISI. “That’s the challenge.” An operating system is only as good as the programs that can run on top of it.

That fact is backed up by the following: “Last week’s announcement was not about any change to our vision and strategy, but for sure it was a change to our operating approach. Amy Hood, Microsoft’s chief financial officer, recently told investors that the company expected to make about $15 billion in revenue from Windows during its last fiscal year, which ended June 30. About a quarter of Windows revenue was from volume licensing deals with big business customers, who typically pay for rights for Windows upgrades over several years, along with the ability to manage a multitude of users over corporate networks.

Windows remains the dominant operating system on PCs, and unless that starts to change, Microsoft is unlikely to stop charging computer makers for the software. The company’s chief executive, Satya Nadella, also made Windows free on devices with screens smaller than nine inches, a category that consists mainly of smartphones and tablets, along with some laptop-like products. When Nadella says there is no clear line between the consumer world and work, he’s clearly onto something, and perhaps Microsoft’s best shot at capturing mobile mindshare is via work where it has the strongest presence today.

Executives see advertising revenue from Bing, the company’s Internet search engine, which is enmeshed in various functions within Windows, as one avenue. As people shift to mobile devices controlled by Android and iOS, Microsoft will have a hard time, gaining market share for Windows on the phone or tablet — Surface sales not withstanding.

In addition, if the company can get enough people to buy games and other software through the Windows app store, its cut from those transactions could become meaningful. What Microsoft can hope to do is build on apps like Outlook and Gigjam and try to force its way into mobile via applications that work across platforms. Microsoft is also seeking to participate in the hardware side of the technology business, with its Surface tablet computers and Lumia smartphones, though it recently announced plans to scale back the smartphone business after weak sales. On one point is the lethargic hardware, on another is Windows 10 and its multi-platform delivery model and on the final is the cross-platform application approach, where Microsoft appears to be faring much better. Microsoft can afford to be patient, but while it hopes that the Windows handset market will wake up, how will it affect financial markets perception of the company?

It is worth noting that supporting rival platforms, while doing so has costs, is likely a far cheaper enterprise than running factories and global distribution channels. (The old joke about sales being easy, and supply chaining being hard applies here.) However, given that the group’s phone businesses’ cost profile has been whacked so badly, it is reasonable to assume that Microsoft isn’t losing too much on the efforts on a quarterly basis. Also, assuming that piggy-backing on rival platforms feeds directly into its Office 365 engine, it would make the costs of supporting third-party platforms more than palatable. If Microsoft was willing to spend as much as it has, and keep going, it’s hard to imagine an expense that could crop up and undermine its mobile will. Nobody could argue after that mammoth write-down that Microsoft’s mobile future is looking bright, but at the same time, it would be a huge mistake to underestimate Redmond.

Microsoft clearly recognizes the strategic importance of mobile, and it’s going to continue to try to find a way to succeed, come hell or high water.

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