Microsoft – MS Phone home.

Reply to this post

There are signs that Microsoft may be backing away from phones.

• Following the executive re-organisation last week, Microsoft’s new mission statement contains enough ambiguities to make me think that it is contemplating getting out of phone hardware.
• The new mission is to “empower every person and organisation on the planet to do more”.
• Microsoft frames this in the context of a mobile first, cloud first world but it is ambiguous enough such that Microsoft could dump all of its consumer assets (excluding Xbox which is specifically mentioned) if it chose do to so.
• Against this backdrop Microsoft articulates its ambitions as:
  • Reinvent productivity and business processes
  • Build the intelligent cloud platform
  • Create more personal computing
• Again these could easily exclude the phone business and when Microsoft discusses making “tough choices in areas where things are not working”, all eyes turn to phones.
• The problem is that the phone business is strategically important and if Microsoft ditches it, it will make things much harder.
• In the consumer ecosystem, the user primarily makes the choice of which ecosystem in which he will live his Digital Life based on his experience on a smartphone.
• This is because he spends the vast majority of his time on this device and this number is still growing.
• Having a device one one’s own platform ensures that one can develop and promote one’s own ecosystem to its best possible advantage.
• Microsoft has made its Digital Life services available on both Android and iOS but here it is either competing against Google or against Apple.
• Because both of these companies effectively control the devices that their ecosystems are own, Microsoft will be at a huge disadvantage when trying to promote its own services.
• Microsoft, is already really struggling to get its message across to users on its own platform and I believe that this job will get even harder if it abandons its phone platform and relies on the platforms of others.
• One possibility would be for Microsoft to abandon the hardware and return to encouraging other manufacturers to make devices using its software.
• This is what it did prior to the engagement with Nokia in 2011, and even when it was perceived to be independent, it still struggled to gain traction.
• For me, phones are a blot on the profit and loss account but they are a very small blot.
• Consequently, I think it is too early to give up yet especially given the critical strategic importance of the mobile phone in the entire ecosystem across all consumer electronic devices.
• Furthermore, I believe that the failure of phones it not just down to the phone business, but is also a victim of not selling the entire Microsoft ecosystem proposition very effectively.
• I hope that Microsoft fixes the other problems first and then if phones still don’t work, then considers moving away from the hardware.
• RFM has set three missions for Microsoft to succeed (see here) but success on only the first mission is required for the shares to have plenty of upside.
• The first mission is to deal with the risks of declines in its legacy Windows and Office businesses which I think it has successfully done.
• Consequently, Microsoft remains my top pick in the ecosystem followed by Google.