Software // Operating Systems
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10/2/2013
12:49 PM
Shane O'Neill
Shane O'Neill
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Microsoft Should Get Out Of The Device Business

Microsoft must get over Apple envy and play in the real world of mobile. First step: Unchain Microsoft software from Windows.

Apple has been able to win -- at least with high-end consumers -- by designing all the hardware and software components of PCs, tablets and smartphones.

Google has dabbled with hardware-software unity with its Nexus tablets and by purchasing Motorola Mobility last year. Yet Nexus doesn't feel like a "Google hardware product" (it says "Asus" right on the back), and Google's Motorola purchase was mostly for patents. Google, like Amazon and unlike Microsoft, understands that you don't win by investing big in hardware; it's just a means to get eyeballs on your high-margin software and services.

Also unlike Microsoft, Google provides Android to mobile OEMs for free. Google can do this because it saw early on that Android could be a platform on which it could make money from Google mobile services, apps in the Google Play store and, most of all, mobile search ads. What it needed was scale -- lots of phones, lots of users -- and it got it. Android phones now own 52% of U.S. smartphone market share, according to comScore.

OEMs can mold Android as they see fit, and they like that -- even if this doesn't always work out for the user as complaints of fragmentation, where different versions of Android end up on different phones, are common.

Phone and tablet makers have no such flexibility with Windows, and they have to pay for it. No wonder they're turning their backs on Microsoft, with some PC makers even eyeing free-to-license Chromebooks over Windows 8 ultrabooks. Of course, Microsoft could follow Google and give Windows away to excite phone and tablet makers and motivate developers. But that's not going to happen as Windows is still too fat a cash cow.

Instead, Microsoft wants to emulate Apple, which explains its Nokia acquisition. Even before the purchase, Nokia was making 80% of all Windows Phones. Lumia Windows Phones are selling well worldwide, but they have stalled badly in North America, shipping only 500,000 units in the second quarter, a 16% decrease year-on-year. Low-end Windows Phone maker Nokia has yet to crack the U.S. market in any significant way. Will Americans be able to look at a "Microkia" Windows Phone as anything other than an iPhone copycat?

Microsoft Software Everywhere

Microsoft must accept its mobile reality and customize more of its world-class application software to run on non-Windows devices. The upside, beyond more revenue, is keeping Microsoft's products in front of the droves of young iOS and Android users.

The first step is to acknowledge the elephant in the room and create a full, native version of Office to run on iPads and Android tablets. Microsoft's revenue from putting Office on the iTunes App Store alone is estimated at $2.5 billion for the full 2014 year. The urgency has only increased now that Apple has made its iWorks productivity suite free on new iOS devices and Google has made Quickoffice, its tool that imports and edits Microsoft Office docs, free on all iOS and Android devices for those with a Google account.

Microsoft hinted at its recent meeting with financial analysts that it's working on an Office version for iOS and Android. It should extend that work to all Xbox services, Office 365 (and not just a watered-down mobile version) and Windows Intune. Giving away the Windows OS to hardware partners might not be in the cards, but as Microsoft has done with Skype, SkyDrive, Lync and OneNote, its new CEO should keep going where the people are and share full Microsoft software products on all mobile platforms.

At the very least, it's a good contingency plan for when Microsoft wakes up from its hardware dream.

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asksqn
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asksqn,
User Rank: Ninja
10/7/2013 | 5:52:24 AM
re: Microsoft Should Get Out Of The Device Business
It doesn't help that Windows 8 is a steaming pile of fail. If MS would continue to support the last stable OS instead of forcing XP users to upgrade at gun point, then its PC market may not be suffering. Of course, in the quest for ever larger profit margins, stability is routinely sacrificed.
AsokAsus
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AsokAsus,
User Rank: Apprentice
10/6/2013 | 2:27:30 AM
re: Microsoft Should Get Out Of The Device Business
Don't forget additional layer of consumer confusion induced by Surface RT/Surface Pro, that has now been GREATLY exacerbated by the new names Surface 2 and Surface 2 Pro, as if these latter two are a compatible family with the junior member being slightly slower but otherwise the same.
AsokAsus
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AsokAsus,
User Rank: Apprentice
10/6/2013 | 2:14:35 AM
re: Microsoft Should Get Out Of The Device Business
Not to worry. At the rate they're going, they're going to be out of the device business pretty soon whether they want to or not
shjacks55
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shjacks55,
User Rank: Apprentice
10/6/2013 | 12:43:04 AM
re: Microsoft Should Get Out Of The Device Business
Microsoft used to have good relations with Telcos (Verizon, ATT, etc) whose technology back end is Unix/Linux based. People and Companies don't buy Phones, they buy wireless services from the Telcos who offer discounted communications products i.e. phones. Few people and companies pay full retail.
Microsoft refuses to build a Hardware Abstraction Layer for devices, the only one that Microsoft built and maintains is x86. AMD wrote the x64 HAL. Other Windows CPU architectures died because those CPU makers failed to maintain a HAL for Windows. Microsoft has refused to build a HAL for ARM or MIPS et al.However Google does write a HAL for Android.

Android is also provided as a free OS. Note Engadget (etc) shows iPhone parts as 1/10th iPhone price (assume Chinese manufacturing is negligible cost), but Microsoft instead of subsidizing its OS is charging $40-60 per unit. Not something Samsung et al will accede to.
shjacks55
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shjacks55,
User Rank: Apprentice
10/5/2013 | 11:28:28 PM
re: Microsoft Should Get Out Of The Device Business
In the past Microsoft has created hardware to bolster its software business, example being MS Mouse, Natural Keyboard and Windows Sound System. When MS forked the NT5 code to Xbox, the purpose was to bolster DirectX for Gaming; but with massive cash support it is now a juggernaut of its own. Surface and Windows Phone are attempts to increase market share of mobile (Note Windows CE had a respectable market share before Android and iPhone). Ballmer was a marketing VP at Pepsi; mimes the Dilbert cartoon about overcoming product failure with Marketing. Microsoft did not back this play with cash or time (how many years for Xbox?). And were any previously successful Microsoft devices marketed by poor quality TV ads. Have any Microsoft TV ads been memorable except for their Failure? Apple iPod/iPhone commercials came on after they hit market saturation. Their initial success was through person-to-person (not online) buzz.
MichaelOFaolain
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MichaelOFaolain,
User Rank: Apprentice
10/4/2013 | 8:10:43 PM
re: Microsoft Should Get Out Of The Device Business
I appreciate information from people who have used the Surface Pro. For whatever reason, it seems folks who love other tablets are using social media and fun apps rather than dealing with complex Excel spreadsheets, database development, and WordPerfect (yes, I hate Word and love WordPerfect because it gives me absolute control over documents because it always has given you access to code much like html only before there was html).

Regarding music and photos and books and the cloud and social network sites, yeah I do some of that. But I also like to be effectively productive so I won't do Twitter, texting, or any other thing that allows anyone to interrupt my train of thought anytime and everyplace I am. When did we become a nation of people that like being interrupted while working or talking with someone in front of you or at dinner or....?

I simply don't buy the idea Steve Jobs made our lives better in a way that allows us to make better choices and more productive human beings.
ANON1247061999066
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ANON1247061999066,
User Rank: Apprentice
10/4/2013 | 3:38:16 PM
re: Microsoft Should Get Out Of The Device Business
I love my Surface Pro. It has replaced my laptop and is much easier to carry around and use while I am moving around. The laptop could never do that, but the surface does everything my lap top could do.
ANON1247061999066
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ANON1247061999066,
User Rank: Apprentice
10/4/2013 | 3:31:49 PM
re: Microsoft Should Get Out Of The Device Business
You say Microsoft should get out of the Device business, but it was their "Device Partners" that forced them in. Until Microsoft produced the Surface and worked with Nokia to produce the new Windows phones, the Hardware companies were producing poorly designed hardware for windows tablets and phones, that no one wanted to buy. Their Device Partners were killing Microsoft. Bill Gates envisioned the Tablet (Slate) long ago, but couldn't get cooperation. Apple took his Idea and because they produce the hardware and OS, they could produce a quality product people would buy.
Now with the Surface Microsoft raised the ante, and their device partners have stepped up and produced much better devices, that is starting (yes, just Starting) to generate interest. They lost a lot of ground waiting for their device partners to step up, don't expect people to flock back to them immediately. That is going to take time, years, not days or weeks, or even months. YEARS to repair the damage done.
Their "Loyal Device Partners" flocked to Android, leaving Microsoft to writhe in pain and slowly begin to die. Microsoft was FORCED to get into the device business, and if they get out they are committing suicide. They are positioning themselves to drive not only the software, but the hardware innovation as well. Everyone wins. Their is plenty of room for the Device Partners to produce, because with Microsoft it is still an open market, unlike Apple which does not allow their OS to be used on non-Apple produced devices.
Running a company like Microsoft requires long range thinking, not just the immediate. They are finally moving in the only direction that has a long term future if they are gong to stay relevant in the consumer market.
AntonioJSG
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AntonioJSG,
User Rank: Apprentice
10/4/2013 | 1:54:13 PM
re: Microsoft Should Get Out Of The Device Business
Excellent analysis. We are mobile software developers and this article is very helpful for making decisions on what to focus on.
seventhson74
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seventhson74,
User Rank: Apprentice
10/4/2013 | 1:14:59 PM
re: Microsoft Should Get Out Of The Device Business
I guess we see what we want to see? PC sales might be down year over year but they account for 91% of web traffic. Microsoft may only have 3% of the phone market but it's been growing at a good rate for the last 18 months and over the same time Apple has been falling. WP8 also accounts for more than 10 percent of the smart phones in Europe and it's growing. I am really not seeing how you can come to the conclusion that MS is tracking downward after the last 18 months. I would, and have put my money behind MS because of the trends in it's products.
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