The rumors are flying hard and fast about Microsoft making its own Windows Phone device, just like it built its own Windows tablet named Surface. The rumors claim that they intend to market it sometime in 2013 under the same brand name.
Let’s look at the purpoted reasons for doing such a thing – Microsoft feels that the biggest Windows Phone OEM, Nokia, is pushing its own brand Lumia over Windows Phone; Microsoft wants to build a Nexus-style reference device as an example for OEMs to live up to (in that regard, be like the Surface tablet), or as a plan B if Nokia implodes and other OEMs flee the ecosystem. I think all of these are very weak justifications. Read on to see why.
First, the brand issue. Nokia is pushing Lumia, and I am not sure if that is such a bad thing. Just like “Droid” from Verizon made for a great brand identity for Android, maybe Lumia is what is needed for Windows Phone to identify itself. As a software company, Microsoft should not care as much if Windows Phone handsets are selling because of “Windows Phone” or “Lumia”. Every device sold, helps Microsoft regardless of the brand. In fact, taking “Windows” out of the conversation may make it easier to sell to consumers who tend to associate Windows with a PC, usually in a negative form.
As for a reference design, it is usually needed when the OEMs seem to lack the design or aesthetic mindset in their products. Surface tablet was badly needed because the PC OEMs were clearly lackluster in the past several years while Apple out-designed and out-innovated them on the form factors as well as build quality. On the other hand, especially with the Windows Phone 8 devices that Nokia and HTC especially have shown, it does look like the OEMs have put a lot of work into the design and have innovated quite a bit with the camera and optics, for example. The PureView technology, the wireless charging, the fantastic front-facing camera along with the dedicated optics chip for high-quality pictures and video are all innovations that are in most cases better than the existing competition. There is really no need for a reference design, besides being able to bypass the carriers. However, as it turns out, without carrier subsidies, devices tend to become very expensive and the total addressable market becomes very small. Hence the reference design factor does not seem to hold much weight either.
Finally, the doomsday scenario. Nokia, the biggest and the most innovative partner, is not doing well financially. Even though they are the best and the highest-selling according to some reports, they may not have enough cash to survive long enough to see the glory days of Windows Phone ecosystem. On the other hand, HTC, Samsung and the other OEMs, which typically are already making Android devices and selling those quite well, may not see much promise in continuing to invest in the Windows Phone ecosystem. As a result, Microsoft gets left as the only company willing to commit resources to making devices. As Charlie Kindel pointed out very well, Microsoft is certainly not a hardware company. They may make keyboards and mice, and maybe even Xbox, but they are a software company after all. You simply cannot become a hardware company that can move millions of critical pieces of hardware like smartphones and tablets efficiently, without doing it for a long time and tweaking the supply chain over time. Apple’s Tim Cook, for example, has laid the foundation for their excellence in manufacturing supply chain effectiveness over many, many years. Microsoft simply does not have it in their DNA to make mass market devices efficiently and therefore, cost-effecitvely. So, if Nokia implodes, maybe Microsoft can buy their smartphone division and keep it afloat? Of course, if most other OEMs flee the ecosystem, maybe it is a bigger sign for Microsoft than to keep trying their hand in mobile?
As you can see, there is no real convincing factor to support Microsoft’s interest in making their own smartphone. However, it does seem like they are going down that path. Nokia’s CEO Stephen Elop had a flurry of interviews where he dodged the question diplomatically, almost making it seem an inevitability.
If the move has anything to do with increasing sales and market share, Microsoft needs to focus more on the carrier deals and relationships rather than create a new device. For almost anyone not looking specifically for an iPhone, it is the carrier sales representative who pitches the device. It is also the carrier store that decides which phones get the “hero” treatment and which ones get shoved over in the corner. If Microsoft and its partners do not build solid relationships, involving a lot of financial incentives, a lot of innovative devices will end up being a useless benefit for the ecosystem.
Would you like to see a Surface Phone? Why so?