Key points:
Microsoft unveils two new Windows 10 Mobile smartphones:
- Lumia 950, 5.2" screen, Snapdragon 808, $549.
- Lumia 950 XL, 5.7" screen, Snapdragon 810, $649.
- Both models include adaptive antenna technology with dual antennas; 1440x2560 pixel screen; liquid cooling; 20MP rear camera, triple RGB flash, optical image stabilisation; 3GB RAM; 32GB storage; micro SD card support for up to 256GB; USB-C; Qi wireless charging; have Dual SIM variants. Both products are available in November.
Other new hardware includes:
- Microsoft Display Dock which allows the Lumia 950 range to connect to a large monitor (HDMI & Displayport), keyboard and mouse.
- Lumia 550 smartphone, Snapdragon 210, 8GB storage, 1GB RAM, available December, $139.
- Microsoft Band 2, curved screen, adds barometric sensor, continues to be compatible with iOS and Android.
- Surface Pro 4, with a new stylus design with changeable tips.
- Microsoft Surface Book -- a Microsoft-made laptop with touch screen, Skylake processor, Nvidia GPU, and a display which detaches to become a tablet.
Analysis:
The Lumia 950 and 950XL are the first Windows flagship smartphone models launched using modern hardware for over 18 months. They are the first high-end smartphones launched since Microsoft closed the acquisition of Nokia's devices business in Spring 2014.
They should be important products for Microsoft, but at the Windows 10 devices event, their role was a more as a smartphone holding action. They were completely overshadowed by other Microsoft hardware, notably the Surface Book and Surface Pro 4 launches reflecting the declining importance of smartphone hardware at Microsoft. The company showed the latest iteration of its bold tablet/PC form factor re-invention with the Surface Pro 4. And, Microsoft unveiled its first laptop with the innovative Surface Book. By contrast, both its new Lumia smartphones are evolutionary designs with an unexciting and conventional form factor.
Microsoft needs bolder smartphone designs to alter its mobile market position
Microsoft has only a small foothold left in the smartphone hardware and smartphone OS market. IHS forecasts Microsoft will have a global market share under 3% of smartphone shipments in 2015 and 2016. The vast majority of the market is now Apple's iPhone or Google's Android. Microsoft's position in smartphones is now akin to Apple's place in the PC market in the mid-1990s: It's a niche.
Now, the flagship Windows 10 Mobile Lumia 950 and Lumia 950 XL smartphones serve a similar purpose to Google's Nexus smartphones: They act as signature devices, which demonstrate what the operating system can deliver. Unlike Android however, there is no wider OS ecosystem for Windows 10 Mobile. There are almost no other companies making Windows smartphones and those that are, such as HTC or Blu, make an only token effort.
Lumia 950 features are incremental, not revolutionary
But both Lumia models are evolutionary rather than featuring the bold leading designs, which Microsoft needs to boost adoption. They offer improved cameras, the same Qualcomm chipsets used on flagship smartphones from LG, Xiaomi and HTC, as well as other incremental improvements comparable with rivals. The most innovative hardware design element -- liquid cooling -- is not a consumer facing feature and is in effect a defensive response to the heat issues, which have faced all smartphones running the Snapdragon 810. Liquid cooling on a smartphone should not be a feature to boast about.
Continuum transforms phone into a PC, rather than creating an excellent smartphone
There is little differentiated about the Lumia 950 smartphone software either. The banner feature, Continuum, which allows a Windows 10 smartphone to connect to a large monitor, keyboard and mouse, is not a new idea. Microsoft has two key problems with using Continuum to drive Windows 10 Mobile adoption:
1. Continuum competes with its own compelling productivity experience in the Surface Book and Pro 4.
2. The Lumia 950 is ARM-powered, not x86, and so the kinds of PC applications it runs are very similar to the failed Windows RT devices. Lumia smartphones are not able to run full PC apps. Should Microsoft offer Intel-powered smartphones in future -- which Windows 10 Mobile supports -- then Continuum could prove more compelling. Until now, it's a feature with niche appeal on a niche smartphone operating system.
For Microsoft to move out of the mobile niche it is in, Microsoft needs to re-invent smartphone hardware with a new form factor. Microsoft needs to create a smartphone which has the equivalent effect to the Surface Pro's impact on the laptop PC. Neither of the new Lumia smartphones fulfils this role and IHS sees no reason to adjust its smartphone forecast as a result.
Microsoft device success creates a partner paradox
Even when Microsoft does launch such a bold smartphone design, it must overcome the paradox of its devices business: How to attract OEM partners to make Windows smartphones while offering its own brand devices. The greater the success Microsoft has with Surface devices, the harder this task will become on smartphones.
Smartphones are no longer at the front of Microsoft's mobile strategy, despite these hardware announcements. Microsoft has lost the smartphone war for this generation and the company's leadership understands this and has adapted. Microsoft scaled back its devices business headcount dramatically in spring 2015. And, Microsoft launched its best apps on Android and iOS -- for example the new touch version of Microsoft Office -- ahead of a launch on Windows smartphones.
Now, Microsoft mobile strategy correctly focuses on three fronts in parallel:
1. Target the mainstream mobile audience on Android and iOS with Microsoft software & services. Microsoft knows the greater prize now is to ensure that consumers and businesses use its software. For example, if Microsoft had continued to keep Office exclusive to Windows, or offer it first and best on Windows, then the vast audience of Android and iOS users would have been tempted by rival offerings like Google Docs or even Apple iWork which could have hurt Microsoft's overall Office business in time. The same rationale applies to all of Microsoft's other services.
2. Seek to subvert the Android operating system. Microsoft is attempting to turn Android's business model into its own favor. It's aiming to have its apps pre-installed on Android smartphones by all the leading smartphone makers. And, it's working with Cyanogen to create a new services layer for Android embedded in Cyanogen OS, akin to Google Play Services, which would provide most of the benefits of creating an OS but with complete Google Play and Android app compatibility.
3. Offer productivity-focused users a Lumia smartphone alternative. To support Microsoft's company-wide productivity strategy, the new Lumia smartphones offer a more PC-like experience. This enables Microsoft to maintain its smartphone foothold while its innovation teams seek a revolutionary product design.
Lumia 950 and Lumia 950 XL are a smartphone rearguard action. They enable Microsoft to maintain a presence in the smartphone market while Microsoft's research and development teams search for a way to re-invent the smartphone.
When they do find such a design, IHS recommends Microsoft should drop the Lumia brand in favour of a new fresh smartphone brand, such launching a "Surface Smartphone".
