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Jouko Ahvenainen

Microsoft's next mobile moves?

Former Nokia CEO and then head of Microsoft’s hardware device business Stephen Elop has left Microsoft. This is the final sign that CEO Satya Nadella is pursuing a new strategy for the mobile business. We probably learn more about the new mobile strategy during the next few weeks. The interesting question is whether Microsoft will continue with its own mobile devices, and if it continues, on what software?

I have written several times about Microsoft’s mobile strategy and the transition Nadella has started, for example, MS swings mobile strategy into action with layoffs and Where's Microsoft mobile heading? Nadella has really made a strong change in the strategy as I predicted. He made an immediate cost cutting in the former Nokia organization, Microsoft started to offer Office to other mobile operating systems and now it has made acquisitions to have a more relevant (especially enterprise) software for mobile and tablets. The latest acquisition was 6Wunderkinder, the creator of the to-do list app, Wunderlist.

Now it is time for Stephen Elop and another former Nokia management team member Jo Harlow to go. The hardware device unit is integrated to a new ‘Windows and Devices Group’. The interesting question is, what is this group really going to do with the devices. In theory we have four options: 1) they continue with their own hardware and Windows for phone, 2) they continue with their own hardware but start to use another operating system, 3) they ramp down or sell the hardware but continue Windows for phone and offer it to other manufacturers, or 4) they get rid of mobile hardware and operating systems.

They don’t really have positive signs that Windows starts to win market share in mobile devices. It is not easy to justify continuing with their own mobile operating system, but at the same time it is not an easy decision to abandon it, when they want to offer similar user experiences in PC’s, tablets and mobiles. They have invested years of work with the Xbox and the speculation has been if it indicates they can wait 5 years or more to make Windows successful in mobile. The fact is anyway that it is very hard to justify to continue with the Windows phone.

Does it make sense to continue with its own hardware? Google concluded it didn’t make sense to own Motorola. Now it looks like Microsoft's Surface tablets are winning market share, so they probably want to continue that, and it has been quite a cost effective operation compared to the ex Nokia phones for Microsoft. Could it then make sense to continue with hardware and take another operating systems, in practice Android, and use it as a test bed and best in its series to offer all Microsoft’s enterprise solutions and applications?

During Elop's tenure they have focused to offer lower and middle category phones, when Apple and Samsung got attention by making high-end flagship phones. This is something they must have now considered at Microsoft too. Could it anyway be better to keep own hardware and operating system and make flagship phones that are especially for business users and include all Microsoft enterprise solutions? In the consumer market Microsoft is really behind Google and Apple.

The fact is that the main question for Microsoft has, is how it can guarantee money from Office and enterprise software. It means the software must be used in Android and iOS too. An interesting fact is also that Microsoft makes money from Android through patent payments, and Google doesn’t really make money directly from Android (data and apps are then another story). Maybe there are actually interesting scenarios that Microsoft could start to use Android and gets its apps and software strongly to Android phones and its own hardware could be the flagship to test and demonstrate this. It is not only about the operating system, but how much your software is there and how much it is used.

I’m sure Microsoft has played with many scenarios, how to continue with mobile hardware and operating system. We can conclude now for sure that Ballmer’s and Elop’s strategy is not valid anymore. And Nadella has now proven several times, he is able to implement big changes and he does it fast. I expect during the coming weeks we hear more about the new mobile strategy, more cost cutting (i.e. reductions especially for former Nokia people) and more actions to get their software to iOS and Android.  It is hard to believe they really want to continue with Windows for phones until they really set up a 5-year plan. They can continue to design hardware and keep their brand there, but outsource all other hardware functions. Microsoft wants to get its software to an important role in each and every mobile device, and they probably want to offer their own flagship devices to create the standard for this.