Nov 02, 2012

What's the point of Microsoft manufacturing their own smartphones and tablets?

Microsoft has never been much of a hardware manufacturer, aside from the XBox/X360. Now I'm reading a lot of press about them starting to manufacture their own hardware, at least Windows smartphones and tablets. One constant in the articles seems to be that Microsoft's partners that are currently manufacturing Windows phones and tablets are none too happy about this, as one might expect. I'm not sure I understand why Microsoft would want to do this. It seems like a mash-up of Googles model (provide the OS and app store for everyone to utilize) and Apple's (provide the hardware, OS and app store all in-house). Will this actually help Microsoft break through its abysmal adoption rate in the smartphone market, or is this a mistake that will alienate its existing business partners?


Don't forget the Zune.  Maybe they have such happy memories of the Zune's sucess that they want to revisit it.  Sorry, it's Monday, or as I like to call it "Snarkday".


It's a risky decision, in my opinion, for MS to start making hardware that directly competes with its long established partners.  That is one big difference between MS manufacturing smartphones/tablets and the XBox - there weren't already partners manufacturing MS gaming consoles when MS went into the console business.  I'm also not sure that the hardware or the software is the problem for Windows phones (I've used one of the Lumina 900 smartphones, and thought it was a pretty even competitor to a current iPhone or Samsung Galaxy.  


I think the problem is like trying to conquer with Portugal as your starting point - you have a small beachhead and a long path ahead.  Microsoft is starting so far behind at this point that it almost doesn't matter that their hardware and OS is as good as the competition.  Over 50% of the cell phone market is now smartphones, so they have to convince those people that the iPhones and Androids that they are already using and familiar with are not as good of a choice as a Windows device.  The other 45% of the market that are still using feature phones have to be convinced that a Windows Phone is easier to use or has superior features to the other choices.  One problem with going after that portion of the market is that it is likely to be more sensitive to price point than the "early adopters" and Windows phones are not particularly cheap unless heavily subsidized.  


Perhaps that last point is the reason that Microsoft is risking the alienation of its partners; Microsoft is able to subsidize its own hardware much more easily, and by offering a high-end device at a mid-level price, perhaps the company can establish a growing presence where the product stands on its own merits.  The risk is that companies may be reluctant to partner with MS in the future because of the risk to their own company -cough, cough Nokia.       

Good question. My opinion: Microsoft doesn't care all that much about angering its partners. I believe Microsoft still has an 800-pound gorilla mentality and feels it can pretty much dictate terms to partners. That's why I always thought Nokia made a mistake partnering with Redmond on a smartphone. Nokia needs that partnership to work far more than Microsoft does. In fact, Nokia's existence pretty much depends on it.

I don't see Microsoft making much a dent at all in the smartphone market, whether it or a partner is manufacturing the devices. It seems to me that Microsoft still believes that marketing and bluster from Steve Ballmer can make up for the fact that its mobile strategy hasn't kept up with Apple and Android. Asserting that your products are superior doesn't work when consumers can decide for themselves if they are.

Everybody in the industry is now realize that Apple's model is the best for profits. Google is certainly following in Apple's footsteps with its Nexus products, and now Microsoft with its Surface products.

Yes, this has the potential to anger some of Microsoft's partners. But they have only themselves to blame as none of them seem to have gotten out front in tablet development. The Surface tablets at least set a standard for partners to follow and build off of to grow the platform.

Microsoft sees the future, and it's not necessarily like the past. They need to have some control over the hardware, same goes for Google. So they are no longer waiting for hardware partners to put out products, they are doing it themselves and the partners can follow or not as they like.
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