Tech Talk: Analyst Suggests Microsoft Quit The Device Game and Focus on Services


It’s seemed as though Microsoft has been struggling in the mobile device market here in the US. Now according to analysts Chetan Sharma, it may be time for Microsoft to focus their energy on services rather than devices. Some markets in Europe have been kind to Microsoft, but according to the report, it may not be enough for Microsoft to keep spending in this area.

While Microsoft has been struggling to keep up with the device markets, they have announced 18,000 job cuts. Out of those 18,000 cuts, 12,500 of them were former Nokia employees. These job cuts have made for the largest in Microsoft history. Sharma notes that Microsoft should learn from Google and how they have attacked the device market. “Google was tempted by the lure of the device business and to some extent was forced to buy Motorola,” He continued to say, “It took 10 quarters to realize that the device business is a different beast, that there was a DNA mismatch, but the exercise did provide some key business insights to the management team. Google shed the device business and kept its partners happy.” Much like Google and Motorola, Microsoft acquired Nokia.

The difference between what happened between Google and Motorola, and Microsoft and Nokia is a simple one. Nokia threatened that they would start making Android devices, and lose focus on Microsoft devices. Sharma said Microsoft “had no choice but to acquire the beleaguered company that has been just devastated since it picked up Windows as its primary OS.” However, instead of selling Nokia off entirely, Microsoft instead just shrunk the company in hopes that they can still control the hits. “It was clearly a mistake both by Nokia first and Microsoft after that.” Sharma continued to say that Microsoft CEO Satya Nadella decided to “shed a good part of the business in a mere three quarters (a clear admission of a mistake). While the impending decimation of the once vaunted Finnish brand was very obvious, the bigger question in front of Microsoft is ‘What to do with Nokia that’s remaining?’ The current plan is to continue churring out the Lumia devices at different price points and see what happens.”

In the second quarter Windows devices accounted for only 1.3 percent of devices in the US market. World wide, Windows devices accounted for 2.7 percent of devices.  “Granted that in some countries, Windows is starting to approach double digit market share, even Microsoft admits its mobile strategy is in shambles,” Sharma continued to say, “After being in the U.S. market for more than two years with billions spent in marketing and distributing, 1.3% share is nothing to write home about. Microsoft can get better traction in markets where new-subs are entering the ecosystem vs. replacement markets like the U.S. However, what market is telling us is that despite the blood, sweat and tears that have been spent over the past few quarters, there is little appetite or need for another platform.”

While according to Sharma, Microsoft may have no place in the device markets, they could still strive in other areas. Cloud computing is one area where Microsoft could do well, or even in enterprise areas. Sharma says Windows Phone is “very well designed and the devices coming out are quite good. However, the current data indicates that unless something changes drastically, Windows Phones might be on the verge of being ‘Zuned out’ of the market. And just like Zune, the fault will lie not in the product or the distribution or the marketing but rather in the timing of the market entry. Microsoft might be better off giving up on its device dream and just focus on services on top of the platforms that dominate. It might be time for hermit crab strategy.”

No matter what happens to Microsoft and their attempt at devices, there are other things they could do like follow Google in the form of a Nexus line. Sell off Nokia and focus all of their efforts on their services. They could also follow a BlackBerry approach and develop extravagant paid apps for other platforms. What are your thoughts, what does Microsoft need to do to keep up with the times?