Microsoft writes off its phone division because, well... no one you know bought them

Nic Crowther
Thu 09 Jul

In breaking overnight news that should come as no surprise to anyone, Microsoft has slashed jobs from its struggling Windows Phone division. The announcement came in light of latest sales figures that showed that the IT giant controls only less than three per cent of the global smartphone market – and that number is slipping.

How many jobs? Well, 7,800 to be exact... accampanied by a US$7.8 billion writedown. Ouch.



Market Battle 
It’s brutal news for on of the world’s biggest software companies. Microsoft was so very late to the mobile game that, by the time Apple reinvented the sector with iPhone in 2007 and Google delivered Android for free, there was simply no space left in the market for them to own.

In September 2013, a US$7.1 billion acquisition of the struggling Nokia brand looked like a smart hand to play. Similar to Microsoft, Nokia was left struggling with a poor OS that couldn’t compete with the two market leaders. What Finnish company did have was a reputation for building indestructible hardware, and it seemed a logical choice for Microsoft to absorb that corporate knowledge and relaunch its mobile offering.

As of this morning, it's all basically worthless.


Platform games
The Windows Phone strategy was built around the recent launch of Windows 8. From all reports, it is an excellent platform that works seamlessly with the company’s desktop version. The only problem was that, by the time they got to market, most consumers had made a commitment one way or the other to iPhone or Android. 

This created another problem for Microsoft, in that no one was really interested in developing apps for Windows mobile given there was little chance for a return on investment. Developers could create apps for two platforms and hit 95% of the market. Why waste extra time and energy for a tiny audience. As a result, the Windows app store never gained traction and buyers continued to avoid the platform.

Senior management at Blackberry would also recognise this scenario.

Where are we now?

The result is that Windows Mobile is now a smouldering wreck with few options in the crowded market. Industry observers have noted that one solution might be to look at the strategy for Microsoft’s Surface tablets, which have seen reasonable market penetration through robust hardware and a streamlined range of products. By simplifying the offering and maintaining a competitive price point, Microsoft could build a compelling argument for keeping users within its own ecosystem.

How this plays out in the next 12 to18 months will be crucial to the survival of Windows Mobile.