Microsoft's Mobile Mistake

By Stephanie Blanchard, Digital Editor — February 25, 2013

Steven Ballmer, Microsoft's CEO, has been at the helm since pretty much the start of the millennium, February 2000. Since then, the company's shares have dropped and the company has missed a big part of the technology pie. Its dent in the smartphone and tablet market is barely noticeable. It might be that Microsoft has lost its way, or that it didn't have much of a mobile strategy to begin with.

"We didn't miss cellphones, but the way that we went about it didn't allow us to get the leadership. It's clearly a mistake," Bill Gates said to Charlie Rose on CBS This Morning, an interview that aired February 18.

Mobile Enterprise spoke with Joachim Kempin, a former senior Microsoft (MS) executive and author of Resolve and Fortitude, Microsoft's ''Secret Power Broker" Breaks His Silence, to get more of an inside take.  Spending almost 20 years with MS, Kempin served as senior vice president with the original equipment manufacturer (OEM) division before retiring in 2002.

When Ballmer recently called MS a "devices and services company," the veteran former-executive was alarmed. "Microsoft never was, is, and never will be a device company," Kempin said. "Microsoft creates the tools, and provides the services to end users, businesses and consumers."

Smartphone Stalls
Ten years before Apple launched an iPhone, Microsoft was already in the game with its Windows CE operating system. The OS likely would have launched even a year earlier than that, had there not been for product delays or rivalry between development departments.

However, unlike its desktop counterpart, Windows CE was not on the stratospheric rise. "When there is a product hard to adapt, people are hesitant to buy it," Kempin said, referring to the lack of a toolkit. The toolkit did become available in version two, and, by 2001, the OS was bringing in $150 million annually, rather respectable, but on the low end of the MS portfolio.

When Windows 7 was adapted for cell phone use in 2010, MS teamed up with Nokia and just a handful of others. With few partners, MS currently captures only 4% of the smartphone market.

Kempin urges the company "go for broke" by massively paying for partner advertising.

"If you want to promote the Windows 8 phone, put money into them," he said. "When Apple comes out with a new color on the iPhone, 15 people are writing about it." With Windows 8 phones? Crickets. He strongly advises MS invest in brand awareness. "If that cranks up market share, significantly, maybe other manufacturers will be listening," he said.

The Case for Tablets
Apple's first tablet, the Newton, launched in 1993, bombed. Anyone remember that? Around the same time, MS made the decision to abandon its prototype. "The technology was way ahead of its time," Kempin explained.

Seven years later, MS developed its Courier tablet for Windows XP, finally making the form factor available. Around the same time ASUS, Gateway, HP also came out with tablets based on the OS. The OEMs' products ran so hot, however, "you could fry an egg on it," Kempin said.

So when Vista launched, the tablet version was dropped from development. Why? Five years had lapsed between XP and Vista, when normally there should have been only three. MS had time constraints to move on to its next operating system. Secondly, "the company had no confidence in PC manufacturers to get it right the first time," Kempin said.

Windows 7 released in 2009, yet still without a tablet version. What was going on? "They totally missed that technology moved along," Kempin said. "Apple understood that, jumped in and made it happen." In mid-2010, Apple launched the iPad.

As Apple Does
"The real problem is by doing these hardware things, they are trying to mimic Apple and that doesn't work," Kempin said. In contrast to Microsoft's foray into smartphones, Apple has "total experience, factory relationships and the ability to price high—a totally different ballgame."

Also, "the team underestimated what Apple didn't underestimate: the graphic, the screens themselves, the CPU in the form of ARM chips which made it suddenly feasible," Kempin said.

Hardware – Hard Sell
When it comes to Surface Pro, "Every PC manufacturer could have done it the same way or better. So why are they making it?" Kempin asked of the latest combination device. In addition, because MS does not own a factory, or have a reliable track record with sourcing hardware components, producing devices is a costly endeavor.

Not only that, but it breeds acrimony with current and potential partners. "MS grew up providing software to hardware manufacturers who make the devices," Kempin said. "OEMS are now looking at Microsoft as both a supplier and competitor. Do they have reason to trust that company? I wouldn't."

Kempin's final advice to Microsoft: spin off the device division and focus on its origins. He believes in the company and wants it to regain its greatness. "Why are they trying to open retail stores?"


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