NEW BLOG: Microsoft’s new CEO Satya Nadella (pictured) certainly said the right things following his appointment last week.
As has been clear for some time, Microsoft needs to improve its standing in mobile and Nadella made it clear that this is high on his agenda.
In his first email to Microsoft employees as CEO, Nadella wrote “our job is to ensure that Microsoft thrives in a mobile and cloud-first world”.
“The opportunity ahead will require us to reimagine a lot of what we have done in the past for a mobile and cloud-first world, and do new things. Our industry does not respect tradition — it only respects innovation,” he added.
But the new CEO will need more than words for Microsoft to bridge the gap to Apple and Google in the mobile space. He will need to use his position to fundamentally change Microsoft’s approach to mobile.
As one of the driving forces behind cloud computing at Microsoft, Nadella will continue to push this element, but he clearly intends for mobile to play a bigger role under his stewardship.
And he does have material to work with.
Although the company’s Windows Phone operating system has not yet proven it can become the third mobile ecosystem to rival Android and iOS, there have been some positive signs.
Figures from Kantar WorldPanel ComTech put the market share of Windows Phone at 10 per cent in Europe, a clear third place behind Android and iOS. This is a solid market share on which to build.
The fact that Windows Phone now has a larger number of big-name apps (Instagram, Vine) than it did previously should also help with uptake as consumers start to see there are options beyond Android and iOS for popular apps.
And now that Microsoft has committed to acquiring Nokia’s Devices & Services it will soon have a ready-made device vendor to give it added impetus for driving the growth of its mobile services.
But there remain significant challenges.
Firstly, the division Microsoft is buying from Nokia recorded a drop in net sales and an operating loss in the fourth quarter of 2013. The sales slump was attributed to lower mobile phone sales, and to a lesser extent, fewer smart devices being sold — hardly encouraging.
Microsoft will be going into the acquisition with its eyes open and clearly believes the combination of its software with Nokia’s phone nous has the potential to succeed. But there will be a lot of hard work ahead to make it work.
Another challenge that Nadella faces is how to position Windows Phone.
There are other big-name vendors (Samsung, HTC and Huawei) working with Windows Phone and Microsoft is reportedly paying support fees to some of these to facilitate this. That said, Windows Phone devices only make up a fraction of sales for these players, who offer a far more extensive range of Android devices.
But there is still interest in Windows Phone which Microsoft will not want to put at risk when it acquires Nokia’s handset business. Samsung is reported to be preparing a new device powered by Microsoft’s OS while there have been rumours of Sony working on a Windows Phone device.
There has been talk of Nokia developing Android devices (with a Windows Phone look) to replace its ageing mid-level Series 40 devices. If this was the case, Microsoft would need to work out exactly where Windows Phone fits into the Nokia portfolio.
The option of building an ecosystem around Windows Phone and Nokia alone is probably not viable in the foreseeable future. Only Apple has made this really work before, and with Nokia selling far fewer smartphones than the iPhone maker, it’s not something that would be easy to achieve currently.
There are clearly a number of considerations around Windows Phone and Nokia and Nadella will need to strike a balance in order for both to thrive in the future.
Another issue for Nadella could be that his ability to bring about change may be limited by the fact his predecessor Steve Ballmer remains on Microsoft’s board and co-founder Bill Gates is to become a technology adviser.
Microsoft under Bill Gates may have made its name in the PC-based world, but that doesn’t mean his renewed influence will be a problem. His time away from the front line at the company could give him a renewed perspective on the future direction of the company.
And the fact Ford CEO Alan Mulally was linked with the role due to his turnaround credentials shows there is an acknowledgement by Microsoft’s board that change is needed at the company.
There are also signs that Nadella has what it takes to steer Microsoft towards a more mobile future.
Unlike Ballmer, a born salesman, Nadella has a technology background and a good relationship with Microsoft’s engineers, meaning they are more likely to follow his line of thinking.
In addition, he has a track record for bringing about real change, as evidenced by his prominent role in driving Microsoft’s efforts to make its software available in the cloud.
Nadella is said to be a calm presence, able to get colleagues to buy into his vision — in contrast to Ballmer’s more brash and aggressive approach. This could be what Microsoft needs if it is to innovate and compete more effectively in the mobile arena.
So, there is definite scope for Microsoft to make progress in mobile. Nadella has set out his stall to focus on mobile and if he can exploit the foundations already laid and use his position to change the company’s focus, he could be the man that leads Microsoft into a mobile future.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.