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Windows: State of the Platform part 3 - Hardware and a new CEO

Windows: State of the Platform part 3 - Hardware and a new CEO
As we covered in Part 2, Windows Phone is expected to take a big jump with its feature set when version 8.1 hits. When you combine that with the reportedly aggressive licensing fees and expected expansion into more emerging markets, and there are good reasons to expect that Windows Phone can continue growing its market share in 2014. Although, without some incredible hardware and marketing, it's hard to tell exactly if continued growth will be enough to really allow Windows Phone to cement its place as one of the leaders of the mobile ecosystem.

Of course, the marketing budget will always be there for Microsoft, and the hardware could become a bit more interesting once the Nokia deal closes, which is expected within the next month. But, not all of the hardware questions will be answered with that acquisition. To a certain extent, the acquisition will create more questions. Some have likened this deal to Google buying Motorola, but that's not quite the right comparison. The general idea between both was that the purchase would give each too much power in the market, but really that would have only been true if Google had purchased Samsung. Motorola had the brand name recognition, but not the consumer attraction. On the other hand, Nokia is responsible for upwards of 90% of all Windows Phone handset sales, so the purchase has a huge impact on the platform as a whole.

Microsoft's hardware brand


Theoretically, a good amount of those sales will transfer over to Microsoft once the deal is complete. Microsoft is getting the Luma brand name in the deal, which may help mitigate the fact that the devices won't be carrying the Nokia branding anymore. But, that Nokia branding has a lot more value in a lot more regions than the Microsoft brand does. Microsoft has spent the past fifteen years or so making decisions that have eroded the value of the Microsoft brand. And, Microsoft has never really had much cachet in the world of hardware, because the company has never really built much in terms of hardware, it has mostly been a software and services company. The most successful piece of hardware built by Microsoft (perhaps tellingly) doesn't even carry the company's name, it is simply known as the Xbox (original, 360, or One). 

Windows: State of the Platform part 3 - Hardware and a new CEO


If you're looking for hardware that carried the Microsoft brand, there were the ill-fated Kin smartphones, various keyboards and mice, and there was the Microsoft Zune. The Zune which did nothing to help the company's image as offering solid hardware, because while there were multiple models released from 2006 to 2009, it was never a real competitor to the iPod. 

More recently, there has been the Microsoft Surface tablets, which have been something of a mixed bag, though not due to the hardware. The Surface tablets haven't gained traction mostly because consumers don't want Windows RT. But, the Surface Pro devices have done relatively well in terms of Windows tablets, and have helped to raise Microsoft's hardware stock a bit. Microsoft is most likely hoping to build on that with the help of Nokia's (soon to be former) Devices and Services division. However, it's still unclear exactly what to expect from Microsoft's new hardware division. Given that we haven't heard anything, it could be assumed that the same sort of Nokia devices will continue coming out, just with the Microsoft branding. 

Nokia incoming


The Microsoft Surface tablets haven't had the most impressive design. They have been nice enough, if a bit utilitarian. Though, it's unclear how much Nokia's team will help to change that. Nokia devices have iconic designs, that much can't be argued; and, Nokia designs tend to be better than Microsoft, but they aren't always top of the line. Nokia makes great hardware, but it tends to be on the chunky side, but that may just be to fit in with Nokia's history of building brick-like handsets that are as tough as they feel (which is getting harder and harder as screens get bigger and bigger.) Still, building tough hardware is something that fits with what Microsoft has done with the Surface. 

Windows: State of the Platform part 3 - Hardware and a new CEO

Of course, the tablet and desktop space is not where Microsoft will be finding the most value in its new hardware division. The real value will be in the phone space, because that is where Microsoft has been nonexistent with its own offerings, and Nokia has had a history of success. Though, Nokia's most recent success in the smartphone world is one that likely won't be continued once Microsoft takes over: the Nokia X line. 

It does seem like a fairly reasonable assumption to assume that Nokia's recent foray into Android devices won't last too long, once Microsoft takes over. It is hard to believe that Microsoft would want to keep Android products in its arsenal (it would rather make money from Android via patent licensing to Android makers), especially since the new features of Windows Phone 8.1 are aiming to make the Nokia X lineup unnecessary. But, just because we know what will see its existence end in terms of Nokia hardware doesn't mean that we know what there will be from Microsoft. 

But, the trickiest part of this deal actually won't be about what hardware Microsoft puts out, it will be in what will, if anything, will be coming from other Windows Phone hardware partners. Samsung and HTC have confirmed that they are going to continue to support Windows Phone, but that doesn't necessarily mean much, because neither has done all that much in terms of supporting the platform up to this point. The two companies combined to release just one Windows Phone handset each last year. The HTC 8XT was nice, but couldn't really compete with what Nokia offered; and, Samsung hasn't put out a noteworthy Windows Phone device since the ATIV S, which was released back in 2012. 

As mentioned in Part 2, Microsoft has attracted a number of new manufacturers in emerging markets, at least some of whom were pulled in because they were promised that they wouldn't have to pay licensing fees for the Windows Phone software. Given that Windows Phone has its best chance of continuing its growth through emerging markets, this seems like the perfect strategy, and could even cause a slight shift in terms of whether Nokia/Microsoft will make up a large proportion of the Windows Phone ecosystem moving forward. 

Although, just as mentioned before as well, emerging markets can help continue growth, but they won't do as much for the Windows Phone brand as it would to have WP devices from Samsung, HTC, and Sony to go along with the ubiquitous Lumia handsets. As it stands right now, Samsung and HTC may offer maybe one new Windows Phone handset each this year, which means it could be all on Microsoft to carry the high-end market where the competition is the toughest. 

Wearables


The general consensus is that wearables are going to be the big thing in terms of hardware this year, but there has been very little in terms of rumors as to what Microsoft is planning for this shift. Microsoft is still trying to shore up the Windows foundation right now, which makes it understandable that it might not be putting too much attention towards the coming wearable wave. But, Microsoft was already caught behind the curve when it came to the smartphone revolution and has been trying to play catch-up, and it would seem to make sense that Microsoft doesn't want to get caught behind again.

As we've mentioned before, voice command systems are a key to wearable devices; but, as we have also mentioned, Microsoft's Cortana virtual assistant is just on the way soon with Windows Phone 8.1. While the early speculation is putting high hopes into the features that Cortana will offer, we don't actually know that Microsoft's voice recognition software will be up to par. Voice command in desktop Windows works fairly well, but that is usually tested in a relatively quiet environment with a dedicated headset. This is very different from the world of mobile devices, which often have to contend with very noisy environments in the outdoors.

Windows: State of the Platform part 3 - Hardware and a new CEO


Even assuming Cortana is up to the task in terms of voice recognition, the other trouble is that the smartwatches being developed by Nokia may not actually be part of the acquisition deal. There have been rumors that the Nokia smartwatch (not pictured above), which is said to be on its way later this year, is being developed by a team that will stay with the Finnish company, which also means that there is no guarantee that it will run a version of Windows. There have been a couple rumors pointing to Microsoft building its own wearable devices, including a smartwatch (also not pictured above) and an eyeglass wearable, but there had been nothing yet to give us the idea that any of these devices will be ready for wider release this year, until a few days ago when it was reported that Microsoft had purchased a wearable tech company for as much as $150 million.

We don't want to get into speculation about 2015 (because that's not the point of this article), but we do expect that the market pressure from the coming Android Wear devices and the potential Apple iWatch will force Microsoft to rush out a wearable in time for the holidays this year, and that this recent purchase has a lot to do with speeding up that timetable. Unfortunately, based on what we've seen so far with Windows Phone and the Metro UI in Windows 8, we can't really expect that Microsoft will be able to gather developers around the platform too quickly, which could very well mean that if we do get a Windows wearable, it may not have much in terms of software. 

Satya Nadella


This is already a crazy year for Microsoft. It has almost closed its deal to purchase Nokia. It is getting ready to release one of the biggest Windows Phone updates so far. For the first time in fourteen years, the company has a new CEO; and, for the first time in company history, there is a chairman of the board who is not named Bill Gates. Of course, that last one actually means that Gates will be more involved in the day-to-day activities of Microsoft as an advisor to the new CEO, Satya Nadella. 

Windows: State of the Platform part 3 - Hardware and a new CEO

Most analysts say that Nadella has a similar blend of technology and business prowess that Gates had, which should make his ascension to the role of CEO quite interesting. The question for us, though, is in what Nadella's new job will mean for the company's mobile products. Nadella worked for about nine years at Microsoft in various positions generally in business divisions and online divisions, before he really found his biggest success at Microsoft as the vice president of the Cloud and Enterprise group. Nadella has been one of the main driving forces behind Microsoft's Azure cloud platform, which now underpins most of Microsoft's online services. 

As Google will tell you, quality online services can and will be a driving force for a mobile platform experience. Google services are the only reason that Google has any control over Android at all, because users want that experience. Satya Nadella is expected to double down on Microsoft's cloud offerings, which will in turn help to bolster Microsoft's online gaming services and mobile services. When you combine an aim like that with hardware built by the former Nokia Devices team, and that could make for some very interesting devices. But, Nadella's influence on the company may not be seen this year, because software takes a lot longer to change than hardware, so we'll have to just keep that in mind for the future. 

Conclusion


Microsoft still has a lot to do just to get Windows Phone and Windows RT on par with the competition in the mobile ecosystem, but a fair bit of that work could be settled if Cortana can come through on its promises, and quite a bit more may come from Satya Nadella's expertise in cloud services. Windows Phone has momentum in the low-end, which can eventually translate to the high-end market, as Android has proven, but that can be a slow process. Still, the combination of Windows Phone 8.1, Microsoft's nearly-closed acquisition of Nokia, and a new CEO make this a very interesting point in time for the Windows platform.

Windows Pro tablets and desktops may continue to struggle to win over the hardcore PC crowd, although it seems as though Microsoft may be willing to give in to the demands of that population, rather than push forwards with its own plans. That may help in the short term, but it likely won't help the platform make the transition to mobile; and, given that mobile is where the entire industry is going, that could prove to be a very dangerous move by Microsoft.

However, it is still possible that we could see a ground-up movement with Microsoft's platform, which would be quite the opposite of what Microsoft expected itself. Microsoft hoped that its dominance in desktops would help to drive users towards mobile, but it may actually turn out that Microsoft's growth in mobile helps to buoy the sinking desktop segment. Windows Phone is doing relatively well, all things considered. And, while it may not be going to challenge Android or iOS in the near future, it could keep up its momentum and begin to challenge iOS eventually (at least in terms of market share, since profits are a very different beast). The Windows Phone 8.1 update could very well lead to some very important help in kickstarting the Windows RT app ecosystem. This could then mean that Windows Phone users could start shifting up into the Windows tablet space, which could then change the perception of Windows 8 tablets and PCs. It's a very long road, and certainly not the most likely scenario, but it is possible. Possible may not be the same as likely, but it's also not the same as unlikely.

Microsoft has a way to go, and a lot of work to be done. It will need a little luck and some very good decisions by new CEO Satya Nadella, but there are plenty of signs to give the Windows faithful hope for the platform. As we have said for a long time, it is never a good idea to count out a company as large as Microsoft, and with the various events unfolding this year, it is definitely possible that we will look back on 2014 as the year Microsoft started its comeback.

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This story is part of: State of the Platform(7 updates)

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