Microsoft's Smartphone Market Journey

Aug 14, 2024

Notes on the Rise and Fall of Microsoft in the Smartphone Market

Introduction

  • In 2006, Microsoft dominated the smartphone market with Windows Mobile.
  • The introduction of the iPhone in 2007 marked a significant turning point.

Initial Reactions to the iPhone

  • Many were skeptical about the iPhone's potential success.
  • Steve Ballmer's Reaction:
    • Described the iPhone as "the most expensive phone in the world" and believed it wouldn't appeal to business users due to the lack of a physical keyboard.
    • Dismissed iPhone's chances against Windows Mobile devices.

Missteps by Microsoft

  • Initial belief that smartphones needed physical keyboards hindered their strategy.
  • The iPhone's higher price ($499) compared to the average smartphone ($200) raised doubts about its market success.
  • Microsoft focused on specs rather than user experience.

Changes in the Smartphone Landscape

  • Steve Jobs aimed to capture 1% of the mobile market by selling 10 million iPhones by 2008.
  • By June 2008, Apple announced they had sold 6 million iPhones, surpassing expectations.
  • iPhone achieved a 28% smartphone market share in the US by 2007.
  • Microsoft’s Windows Mobile dropped from 14% market share in 2008 to 9% in 2009, signaling decline.

The Role of Android

  • In November 2007, Google introduced Android after seeing the iPhone's success.
  • Microsoft continued to develop Windows Phone OS, focusing on business users.
  • 2008 saw the launch of iPhone 3G and the first Android phone (HTC Dream).

The Shift in Market Control

  • Carriers began shifting focus from Microsoft devices to iPhone and Android devices for better sales.
  • By 2009, Android began capturing market share while Microsoft’s Windows Mobile lagged behind.

Windows Phone 7 Launch

  • Released in 2010, Windows Phone 7 received positive feedback for its interface but lacked essential business features.
  • Struggled to attract developers, leading to a limited app ecosystem (only 2,000 apps at launch).

Partnership with Nokia

  • In August 2011, Microsoft partnered with Nokia to develop a competitive smartphone strategy.
  • Nokia’s Lumia 800 was released but failed to penetrate the US market effectively.

Lumia 900 and Market Reception

  • Lumia 900 was well-received for its price and features but suffered from operating system limitations.
  • Windows Phone 8, released in 2012, did not allow existing Windows Phone 7 users to upgrade, alienating early adopters.

Decline in Market Share

  • By 2013, Microsoft regained some market share (3%) but was still far behind Android (78%).
  • Acquired Nokia’s smartphone business in 2013.

Final Attempts

  • The Microsoft Lumia 950, released in 2015, received criticism for its design and app ecosystem.
  • By 2016, Microsoft’s smartphone market share had plummeted to 0.4%.

Conclusion

  • Microsoft’s failure in the smartphone market stemmed from delays in integrating hardware and software, misjudging consumer needs, and lack of a robust app ecosystem.
  • Steve Ballmer expressed regret over the company’s handling of the smartphone market.
  • Key Takeaway: The swift evolution of the smartphone industry during the 2000s showed the importance of user experience over specifications.