Big news, Ballmer is gone. Good riddance! This signals potentially big changes at Microsoft, so lets do a bit of analysis. I'm going to write three blogs, first about impacts to Microsoft, obviously. Then for my loyal blog readers, much more interested on the mobile industry than PC industry, on the Windows Phone side of Microsoft - what does this mean to Nokia and WP8 'ecosystem'? Finally as Elop's name keeps coming up in early press, a few thoughts about replacing Ballmer. But first up, what do I think this means for Microsoft.
I REALLY DON'T LIKE THAT COMPANY
I have tried to be 'fair' and 'open-minded' about Microsoft in my writing and on this blog. However, this is the tech company with the nickname 'The Evil Empire'. That term comes with plenty of cause - over the past three decades Microsoft has been fined countless times huge sums for crushing competitors with illegal methods, using its monopolistic position like a bully. I personally have been a user, supporter, registered developer, and/or authorized trainer for many of the various victims of Microsoft from WordPerfect and Lotus 1-2-3 to Novell Netware, Mosaic and Netscape.
On the hardware side, inspite of how much I here on this blog am critical of the wasted market opportunities Apple has with its strange iPhone strategy (of only one new iPhone per year - increasingly most tech analysts now agree with me that this must change) - I am a HUGE Apple fan, have always been, preferring the Macs to Windows and seeing the obvious, that Windows (for the PC) was a case at Microsoft of Macintosh-envy. So some have interpreted my love of Apple and desire Apple would bring the iPhone to more consumer segments and user-types and form-factors and most of all, to more Emerging World customers, and I have thus been critical of that part of the strategy that Apple now has, that it won't give us more than one new iPhone model per year. I love Apple. This blog is where that commonly-used term 'Jesusphone' originates from - I didn't coin the term, but press mistakenly thought that I had termed the iPhone the Jesusphone, when I explained how after the iPhone would launch, we would consider the handset industry in two eras, the time before the iPhone and the time after the iPhone (like we mark time in the Western calendar, before Christ and after Christ). That blog was then mistakenly labeled as Tomi Ahonen calling the iPhone the Jesusphone - and the term stuck. I was one of very few analysts who could explain why the iPhone would indeed reach 10 million sales in the first year - yet I am no blind Apple-fanboy, I was also the first blog to to pinpoint the moment when Apple's dramatic market-share gains were to end. Once again, the most accurate forecaster in mobile. I do know my backyard. But yes, I hate it that still today, for computer compatibility reasons I use an old Windows compatible Fujitsu. I can't wait for the day that I can return to my beloved Mac.
As the Evil Empire crushed my favorite software giants one after another and feuded for years with my fave PC maker, I have of course picked up a strong sentiment of favoring 'anyone else rather than Microsoft'. Please bear that in mind in my blog series now about Ballmer and the future of Microsoft. But also, I am a 'biznezguy' and I respect good business performance. Nobody can doubt Microsoft has been a phenomenally successful corporation, massive profits, and whatever you think of their methods of getting there, they have pursued and often achieved market dominance in several areas. So while I am not a fan of the 'Microsoft way' of doing business, and I miss my Lotus 1-2-3 and Netscape and various other preferred software, I respect the company. And even if I don't agree with its various evolutionary steps in given areas say with the Windows smartphones or on the PC side now with Windows 8, having a strong Microsoft is generally good for the industry overall.
I am far far more a fan of Apple or Google or HP or Intel than of Microsoft. I personally due to my history with all those that Microsoft has crushed, will never voluntarily give Microsoft a penny of my personal discretionary expenditure - not a penny - except where it is unavoidable such as with the PC and Office Suite situation still currently. So for example the moment Chrome became a viable candidate to replace Microsoft Exploder, I replaced my brower. I never use IE anymore. I will similarly shift away from Office and PC Windows the day it is practical in my line of business. I regularly test the alternatives anticipating that day.
So more specifically on Windows Phone, much as I am a Finn,
and loved Nokia long before I had the privilege of being employed by the
company, and for the past 18 years, never had a day in my life, that there wasn't
a Nokia branded phone in my pocket. Most of those years I have carried two (sometimes
3) mobile phones, and not always has the other one been a Nokia, but always at
least one has been. However, I will never buy a Windows based smartphone, even
from my fave Nokia brand, as long as at least one viable rival platform exists.
So you can rest assured, this blog will never review a Lumia smartphone simply
for the fact, that even if Nokia gave me the phone for free, I would not use it
for one day. I do personally reject anything Microsoft does, and will always
select 'anyone other'. That is because Microsoft destroyed so many of my
favorite software brands earlier in my tech career. And my hatered of Microsoft
trumps my love of Nokia in this case.
Ok. My biases are clear and in the open. Considering that history, please do allow me some hostility perhaps in my postings, I try still, inspite of that bias, to give you my honest view of the strategies and choices and impacts of Ballmer's resignation. So lets start with impacts to Microsoft.
I AM NOT EXPERT ON PC SIDE OF TECH
And again, another mandatory disclaimer. I am not an expert on Microsoft. Yes, I think of myself as a thought-leader in the tech space, but I specialize in the mobile industry, not the computer industry.Yes, I'v been employed in both. Yes I started on the PC side. Yes, these two are gradually converging, but again, I monitor actively and report on the mobile companies and their strategies closely, not the other tech and media giants. So when it comes to the other tech giants who only dabble in mobile, I am not proficient in their total strategic outlook. In the case of Microsoft, it means all those things most people associate with the company, Windows, Office, Xbox etc. And much of Microsoft's new initiatives such as tablet PCs and Cloud Computing, are not my core competence. My main interest in Microsoft is its smartphone OS strategy, what once was known as Windows Mobile and what under Ballmer was relaunched, rebranded and redesigned (and incompatible with the past) as Windows Phone.
And while very many of the industry giants are reference customers of mine (ie they say they have used my consulting services) like Nokia, Google, Intel, Blackberry, LG, Ericsson, Vodafone, China Mobile, NTT DoCoMo, etc etc etc - Microsoft is not a reference customer of mine. I cannot comment on whether they have bought any of my services in private, but at least in the open, they have never said to have used me in any way (although there is a picture of some Microsoft training people entertaining me at a restaurant once haha, make out of that what you will.) Regardless, I would not be divulging any secrets on this blog or in my books in any case, I only talk about whats in the public domain, or what I feel and think. Not what I might know from my private consulting work. I wouldn't last this long as a consultant in this industry if I didn't know how to keep my mouth shut haha.. (ah, the stories I could tell..)
BALLMER THE BULLY
So. Ballmer is gone. Good riddance. He was a bad CEO. He made bad decisions. He made bad bets (Zune, Kin, Surface, Windows Phone). He used Microsoft's past bullying attitude when the company ruled the software market, to try to bully the current IT industry where its legacy software power devices that are becoming peripheral (Desktop PCs, laptop PCs, already being replaced by smarpthones and tablets) or losing share (IE) and where cooperation and open standards are increasingly the norm (Google Android as perfect example). Most of all, Ballmer lost the future to Android, now the most used OS powering computing devices, as Microsoft itself admits, smarpthones are computers just as much as desktop PCs, laptops and tablets are computing devices. And Android now sells more than Windows when all computing devices are added together.
I have by no means been the only one calling Ballmer a bad CEO. I wasn't anywhere near the first to do so. Some in the tech press still thought he was good, or did well as Microsoft's chief executive, but the owners of Microsoft have clearly spoken. On the day Ballmer announced he is resigning, Microsoft share price jumped a massive 10%. The owners of Microsoft, the shareholders, did not appreciate his management. That is the ultimate judgement of a CEO. That they now applaud his departure so vocally, and believe that 'anyone else' running Microsoft makes Microsoft 10% better as a company - (think about that. So 'a monkey could run this company better than Ballmer..' is how obviously the majority of investors view Microsoft. Clearly, Ballmer is a failure).
This is enough proof, that the majority view is that Ballmer was a bad CEO. I will not accept any comments on this blog that argue on Ballmer's merits, they will be deleted without mercy. Whatever little good he might have done is now irrelevant, he has been judged a failure. If he did not resign now, he would soon have been fired anyway. This point is not up for debate and posting comments trying to justify his time as CEO is just a waste of everybody's time here on this blog. We are now looking at the future of Microsoft, not trying to repair Ballmer's reputation. If you want to go celebrate this moron's era at Microsoft, go post your tears on some Microsoft-fanboy site.
BYE BYE BALLMER, WE WON'T CRY FOR YOU
There are many things that were wrong about Ballmer. He's not the brightest kid on the block to begin with. He's abrasive and arrogant and definitely a huge bully. Not good for a company already stuck with a reputation of 'Evil Empire'. But as CEO, we have seen a particular weakness, Ballmer had no focus at all. Every time you heard him speaking, he would have a new priority. Our top priority is Windows on the desktop. Our top priority is Office. Our top priority is smartphones. Our top priority is Xbox. Our top priority is Cloud computing. Our top priority is Windows. Our top priority is tablets. Our top priority is Office. Our top priority is .. whatever pops into his mind this moment. How can a management team run the company efficiently if the boss doesn't give clear direction. I have discussed this fault of Ballmer a few times here on this blog in the past and its clearly one that many of his critics point out now in the reviews of his tenure. Contrast that with Jorma Ollila at Nokia who said clearly 'We will be a 3G company' or Steve Jobs who said 'Apple Computer is now only Apple Inc, and we are a mobile company' or Eric Schmidt saying about Google's strategy its 'Mobile, mobile, mobile'. Thats focus, thats clear, that is how companies across various units and departments learn to focus on the essential, the strategic.
Notice the danger this type of CEO behavior like Ballmer lack of focus poses to Microsoft's partners. The partners hear the right thing - in the case of handset manufacturers, they hear Ballmer saying that Windows Phone is the highest priority. But most of them do not notice that a few weeks later Ballmer's top priority is now in the Clouds then a week later its Windows and the next month its Office. So the partners are led to trust the statement and will be severely disappointed when Microsoft the company doesn't end up holding Windows Phone the top priority long enough to do anything properly with it. Its exactly what Nokia just said now a few weeks ago - Microsoft has not given Windows Phone enough attention.
Some of Microsoft's business is doing well, but in areas where the industry is in decline (Windows on the desktop, Office). Other areas are growing after long struggles (Xbox). But the recent initiatives under Ballmer have failed spectacularly from Zune the music player, to the disasterous launch of Microsoft's own phone brand, the Kin youth-phones, to the smartphone OS relaunch as Windows Phone (collapsing Microsoft's once second-place ranking and 12% market share globally in smartphone operating systems, to the 4% it is now under Windows Phone), to the Windows 8 fiasco as the integrated platform, to the Surface tablet. Here I want to mention that February interview of Bill Gates by Charlie Rose. Bill Gates for the first time was critical of Ballmer's leadership - and many, including me on this blog, speculated that Gates's comments meant that Ballmer's tenure might soon be over at Microsoft.
BALLMER'S BIGGEST FAILED PROJECT
Now if you go back to that interview, the one specific project that Bill Gates singled out, as the biggest failure under Ballmer was what? It wasn't Windows 8 or Kin or Surface. It was .. Windows Phone. Gates said not only that Ballmer had ruined the good start that Gates had built for Microsoft growing to second largest ecosystem in smartphones with Windows Mobile, but Ballmer's actions with Windows Phone had made success impossible. Yes, Ballmer's actions as Microsoft CEO, had ruined any chance of success for Windows Phone. These are Gates's exact words: "The way we went about it, didn't allow us to get the leadership. So its clearly a mistake." This was Gates talking expressly about Microsoft today, not 6 years before, when Gates himself was running Microsoft and Windows Mobile was growing market share to a peak of 12%. This was today, in 2013, when the new Windows Phone was the incompatible with the larger legacy installed base Windows Mobile and Microsoft's position in smartphones had collapsed.
Note, this Gates comment of unrecoverable failure of Windows Phone was after the Nokia partnership had been producing Lumia smartphones for a year and a half, so Gates had given even the 'last chance' ie the 'Hail Mary pass' attempt of getting Nokia to help, the fullest chance. In Bill Gates's words, in public, on Charlie Rose on Microsoft's Windows Phone strategy "So its clearly a mistake." Not 'in trouble' or 'has challenges' or 'might be a mistake'. To Gates, in public, how Windows was run for smartphones under Ballmer - with Nokia - was 'CLEARLY' a mistake.
I wrote on this blog immediately then, that take Gates at his word, he has just killed Windows Phone as a pointless project that can never succeed. If he says doesn't 'allow us to get the leadership' - that means no success is possible. Microsoft had already tried every route to it. They had HTC as manufacturer. They had gone through every major handset brand that didn't make its own OS, including LG, SonyEricsson, Motorola, Huawei, ZTE and so forth. They had convinced Samsung to make Windows smartphones. They had even convinced Palm to run Windows parallel to its own OS. Microsoft had even attempted its own handset sales (Kin) and that was the fastest failure of any handset brand in history (went out of business in 6 weeks, literally a world record in the handset industry). Apple would never go Windows for the iPhone, that is clear. And Blackberry wouldn't either. Nokia was the last significant play that Microsoft had left to try.
WHEN TWO TURKEYS MATE, CAN THEY CREATE AN EAGLE?
So when Gates looked at Ballmer's promise in February 2011, that they would combine the strengths of Microsoft's ailing Windows smartphone platforms which had a combined market share of 5% in 2010, and add to that Nokia which alone held 33% of smartphones globally in 2010 - adding those two together, the potential was clearly somewhere above 33% and under 38% (because some Microsoft's then- current partners would disapprove of the deal Ballmer did with Nokia that Nokia would get preferred treatment, this was obvious at the time).
The major industry analysts were not that optimistic on that marriage, and you'll remember, most who predicted 2013 market share for this partnership and Windows Phone, placed that performance into the 15% to 25% range. Even so, for Bill Gates, approving Ballmer's mobile phone strategy in 2011, if Gates had achieved 12% in smartphones, and Ballmer could, through Nokia, even at the bottom end of that range, deliver 15% of the world's smarpthone market by 2013 with the great hardware that Nokia is known for - Gates would understand that this scenario means Nokia would be severely damaged in that process (dropping to under 12% from 33%), but Microsoft would gain immensely from its position at the time - which was 5%. And the upside was somewhere in the 25% to even perhaps 35% range. A genuine 'third ecosystem' alongside Google's Android and Apple's iPhone iOS.
Ballmer promised Gates internally, to deliver that type of performance. No way would Gates have approved the several years long, Billion dollar per year level marketing support that Microsoft promised to pay Nokia to switch to the platform, unless that kind of market share gain would be seen as the target. Gates would have instantly rejected any plan that promised Windows smartphones to achieve 4% in 2013 through the expensive partnershp with Nokia, when Windows held 5% all by itself in 2010.
When you piss away a Billion dollars per year as CEO, yes,
your Chairman will consider that a failure. A massive failure. So big, he goes
on Charlie Rose to single it out as your biggest failure, Steve Ballmer. So
ignoring the unbelievable collapse of Nokia on Nokia's side as new CEO Stephen
Elop's self-induced nightmare, that bringing in the biggest handset maker in
the world, as your partner, Nokia, who single-handedly is twice the size of its
nearest rival - HP was never that in personal computers, neither was Dell,
neither was IBM, neither was Compaq or Lenovo or Acer or anyone else. Nokia
yes, in 2010, towered more over its lilliputtian smartphone-maker rivals than
any of Microsoft's previous PC industry partners had managed in computers. So
yes, Gates expected the Nokia deal to bring Microsoft Windows to at least 15%,
likely 25% and possibly as high as 35% market share in a couple of years. That
is why today's level at below 5% is total comprehensive failure. That is why
Gates singled out Windows Phone as the big failure of Ballmer's leadership.
EVEN BALLMER ISN'T BULLISH ON WINDOWS PHONE
What can we deduce from this? First, that while ex-Microsoftian Nokia CEO Elop talks vividly about Windows Phone's future - with the passion of a Microsoftian indeed - Ballmer hasn't been vocal about Windows Phone since the Gates interview and Gates himself calls it such a failure that no rescue is even possible. If there was an internal 'evangelist' for Windows Phone at Microsoft, that was Ballmer and he is now gone. Yes, he hasn't yet departed, but he has no effective control of Microsoft anymore and cannot make any strategic decisions while Gates seeks his replacement.
So if you thought that Windows Phone would need more support from top management, you can be sure, it will now get far less support from Microsoft. And what did Nokia just say a few weeks ago, that the big fault in the Lumia range in the Microsoft partnership is not that Nokia hasn't done its part, its that Microsoft has not done its part. (Where have we heard this before? That is the same refrain we heard every time of Microsoft in mobile, from the very first casualty, Sendo, through HTC and LG and Sony and Motorola and Samsung and on and on and on, until now, once again, Nokia).
Secondly, Microsoft is often in races for the long haul, but
it won't stay in disasterous businesses forever. If Gates is now fully in control
and Ballmer gets no say, then Gates's evaluation of Windows smartphone chances
is what governs Microsoft's decisions - it is so ruined, it cannot be saved.
Who in their right mind, takes a project that has zero chance of success, has
cost Billions, and decides to throw more good money after bad. No, Gates
signalled clearly in February 2013 that he wants to terminate Windows Phone. It
will not be part of Microsoft into the future if the Chairman says its beyond
repair. And if there is effectively nobody selling the product anymore (Nokia
now accounts for 85% of the remaining Windows smartphone sales globally as the
other manufacturers bail out of the dying system). And Nokia has not sold one
Windows based smartphone at a profit, so the moment Nokia gets a new CEO, the
Lumia line is terminated.
Now. What can we expect for Microsoft. Gates more hands-on in charge until new CEO steps in. Probably those voices within Microsoft who stayed, loyally, but were rebelling against Ballmer's positions will now get a loud voice in Gates's evaluations. Ballmer-istic strategies and ideas will get low preference. What Gates knows and succeeded in, will get good attention - Windows on the PC, Office, Xbox. Where Microsoft has made good gains and has possibility to succeed, yes, Cloud computing, to keep going. But those areas where Microsoft has recently failed, Surface and Windows Phone - these are deadwood that needs to be cut. I would not be surprised to find those projects to be ended even while Ballmer is still nominally the CEO. Definitely whoever comes in as next CEO, will be reviewing the matters and see that these are hopelessly destroyed prospects where recovery would be disasterously expensive. The new CEO would be allowed to explore new avenues for Microsoft, but definitely would kill the tablet and smartphone projects if they still exist at that stage.
GATES KNOWS CARRIERS/OPERATORS
Let me say a few words specifically about Windows Phone and Bill Gates. Gates knew the smartphone opportunity, he steered Microsoft to it, when he was CEO. He was personally involved in the project and met with CEOs of major handset makers and carriers/operators etc, so he knew first hand what the industry needed. That is why he says the current Windows smartphone project is beyond repair. Because Gates knows what went wrong.
In the PC industry you need PC retail support, VARs
(Value-Added Resellers) and computer retail chains etc to carry your products.
And you need obviously the apps for your platform. In the gaming console
business its a consumer electronics market, you need lots of marketing and
advertising and the gaming industry is a hits-driven business, get a couple of
hot titles (or cool tech like gesture controls) you can leapfrog many rivals.
In mobile, its not like that. In mobile the critical component, that doesn't exist in PCs or gaming, is the carrier/operator community which acts as gatekeeper to the industry. If you do not get carrier support, you don't get the sales. There is no exception to this rule in mobile, ever. Even if you are a giant like Google or Microsoft or Apple, you can't get in without the carriers. Google tried - and spectacularly failed - with the original Nexus. Microsoft tried, and spectacularly failed - with the Kin. Apple never achieved success in any market until it achieved a carrier to support it, and its market was constrained by the carriers supporting it - witness AT&T vs Verizon in the USA for three years, or iPhone in Japan, South Korea and China. Every few months we get rumors that perhaps now, Apple finally gets the China Mobile contract, but until it does, still today, Apple's share in China is far lower than in comparable markets, because the carrier/operator that controls most of the market, refuses the product.
NOT LIKE PC BUSINESS, IN MOBLE CARRIERS DECIDE
Bill Gates knows this. He knows that the carrier support is vital in handsets, and that is different from the PC industry. So Windows Phone success or failure has nothing to do with the size of the 'ecosystem' or the number of apps etc. It has everything to do with carrier relationships. Those carrier relationships were not strong with Microsoft before the Nokia partnership (while Nokia's carrier relationships were the best in the world - on every continent except North America, Nokia was the dominant smartphone maker, and also the continent's largest dumbphone maker. In North America Nokia's carrier relationships had soured in the mid 2000s because of several reasons such as the CDMA-GSM technology war, Nokia's Club Nokia iniative (an app store by the way, years before the iPhone) and the fact that Nokia refused to cripple its premium phones to allow US carriers to abuse its customers.
So, because they only were witnessing Nokia in the US market, many US based analysts mistakenly thought that Nokia was a weak handset (or weak smartphone) manufacturer where in reality, on global numbers, Nokia was massively bigger - and growing more -than its North America-based famous brand rivals. Because Nokia was strong in the US before Apple and was weak now, after the iPhone appeared, was an easy answer for superficial analysis, making the classic post-hoc analysis mistake, that "Apple killed Nokia in the US". Or any analogies ot that such as that Nokia died because of the iPhone and Nokia had missed the touch-screen revolution. In reality, Nokia's fall in the US market started four years before the iPhone appeared and Nokia's smartphone market share had stabilized in the US by the time the iPhone was selling in volume. Today when all Nokia Lumia phones are touch-screen iPhon-a-clones, Nokia's unit sales in the USA are still SMALLER than they were using Symbian before Elop changed the strategy. No, Apple did not kill Nokia's smartphone business, not even in the USA. Nokia damaged its USA position out of strategic choices and was being punished - by the carriers!
And globally, this is the part that most are astonished but
is true - check the numbers. Nokia grew smartphone unit sales more than iPhone
in the year 2010 - while doing this profitably, yes the second biggest profits
in smartphones behind only Apple, but with a far wider product portfolio suited
for mass markets and emerging world clients, and Nokia smartphones with
increasing profits to the end of the year, so Nokia was strong, growing stronger,
using that 'obsolete' OS platform of its own, called Symbian. Why was this? Not
because Symbian was so good, but because Nokia's carrier relationships
worldwide were by far the best. Nokia's market share in the three most populous
continents, Asia, Africa and Latin America was over 50% in smartphones.
Back to Gates. He knows its the carrier relationships. He also has heard this time and again, from the Windows Mobile and Windows Phone executives inside at Microsoft. They have had big feuds about Microsoft's Windows strategy that has caused several top Microsoft execs to depart suddenly, resigning in protest or being fired. Ballmer's abrasive style no doubt contributed to those exits, but so too, specifically in the case of Windows Phone strategy, is how Ballmer poisoned the carrier relationships (and Elop poured more oil onto the fire)
SKYPE PURCHASE KILLED WINDOWS ON PHONES
We heard from Elop when he spoke officially as CEO to the annual Nokia Shareholder Meeting in 2012, that carriers/operators hate Microsoft not because Windows makes bad phones or its apps ecosystems is too small, no. Carriers hate Microsoft because Microsoft bought the biggest threat to carrier survival - Skype. That is what sunk the Windows strategy in mobile. I said in February 2011, when the Nokia and Microsoft partnership was announced that while it was a big risky bet, and my gut said it would fail - this partnership might succeed if both sides played it right. Microsoft was the world's biggest software maker and Nokia the biggest smartphone maker (and biggest handset maker too, and by 2010 it was clear all phones would migrate from being dumbphones to being smarpthones, so the market of 300 million would soon be 2 Billion new smartphones sold annually).
Why couldn't they, being far bigger and stronger (when Nokia was still a healthily profitable company at the time) than say Google or Apple or Samsung - why couldn't this partnership succeed and rule the world. Certainly I said that was a possibility. But I warned that Microsoft's past partnerships in mobile suggested exactly the opposite. That Microsoft would rapidly suffocate and kill the 'partner'.
So originally in February 2011, I felf this partnership might work but we'd have to see the first phones, and what the next version of Windows operating system - the one that Nokia would use - would be like, etc. (As it turns out, both the early Lumia and the early Windows Phone 7.5 were duds with tons of bugs, bad design, the famous 101 problems etc). But in June 2011 I wrote on this blog, that the Microsoft Windows Phone smartphone strategy had just died. Why? Because Ballmer had gone and bought Skype.
Skype may be useful for Microsoft on its cash-cows, Windows
on the Desktop and Microsoft on the internet (where IE is continuously bleeding
market share to Firefox and Chrome and the others). But Skype was the ultimate
poison for carriers. I warned on this blog that the carriers will revolt and
punish not just Microsoft but also Nokia. This was before the first Lumia
handset had even launched. Windows had died in smartphones. Died because of
Ballmer. Died because carrier hate Skype with a passion.
I said so here. Then we had the independent in-store surveys, often under cover, by various journalists from the USA to the UK to China to Finland to France to Brazil that all confirmed the exact same finding - always the same finding - stores have stopped selling any Windows based smartphones. Microsoft started to see the effect of the boycott against its phones. Several smartphone makers bailed out of Windows totally - Motorola, Sony, Dell - and several Nokia and Microsoft execs admitted the carrier revolt - some more vocally, some more mildly but everywhere the same refrain - carriers have put Windows based smartphones into a sales boycott. If one is displayed in a store, the store sales clerk will refuse to show the phone even if the customer asks for it by name - and will push Android or iPhone models instead.
This was reported in numerous media, its not my imagination. But we got the ultimate proof from Elop himself, who said to the Nokia shareholder meeting, that nearly a year after the launch of Lumia handsets, the sentiment against Microsoft remained, the carriers hated Microsoft so much, that many were refusing to sell any Windows smartphones by any brand, not just Nokia. Again, to be clear, Elop did not use the word 'hate' - that is my interpretation of his words, he used the corporate-speak politically correct terminology 'don't like' but explained that this 'don't like' was so severe, it meant many carriers refuse to sell any Windows smartphones today, where they had obviously been selling them happily before. In my book, if a company reduces sales of your product, that is perhaps 'dislike' but if the company stops selling your product suddenly, and after a year, of the two CEO's Ballmer and Elop personally present trying to get you to return - that is not 'dislike'. That is 'hatered'. That is a sales boycott. You don't boycott something you don't like. You boycott stuff you hate.
ELOP SAYS CARRIERS REFUSE SALES OF WINDOWS
What caused this? Skype. Not my words, that was Elop speaking in a public capacity to his shareholders, so its as close to 'testifying under oath' as a CEO can be. He was telling the truth to Nokia shareholders - not that Windows was bad as an operating system. That carriers/operators were punishing all Windows smartphone makers - he said that, some were refusing to sell the smartphones it was that bad - and the reason was not because of no apps in the apps store or anything like that, the reason was because Microsoft had bought Skype.
THIS WHILE WINDOWS PHONE DIDN'T EVEN SUPPORT SKYPE YET
Let me make one more exclamation point on this. This has
nothing to do with having Skype on your phone. Microsoft Windows Phone 7.5 did
not have Skype at the time but there was Skype for Android. Its not that
carriers refused to sell a HANDSET because it could support Skype. No, early
Lumia did not support Skype at all. The carrier boycott was against Microsoft
the OWNER of Skype. Because Skype had over 1 billion registered users already
in 2011, and was an existential threat to the carrier business, threatening not
only the voice traffic but also messaging and videocalls. In that way, Skype is
even more dangerous to carrier survival than say Whatsapp, or BBM or iMessage
I warned you readers in June of 2011, that the Skype purchase has just killed the Windows viability as a smartphone platform. Elop admitted it in 2012, that carriers hate (ok, carriers don't like) Microsoft because Microsoft has bought Skype - and that the hatered (ok, dislike) is so severe, some carriers are boycotting all Windows phones - even as those Windows smarphones did not support Skype at the time. Elop said this, not me. This point is not up for discussion, its a fact.
FINAL PROOF: GATES SAYS IT HAS FAILED
Then we hear in February 2013 Bill Gates tell us that Windows smarpthone strategy was succeeding before, but ruined by Ballmer, and its now be ruined beyond repair. Gates calls the Windows smarpthone performance an obvious failure by Ballmer. After that statement, a few months later Ballmer annouces he quits the company. What does this mean for Windows Phone? That Gates will kill it as soon as he can.
Bear in mind, that Microsoft is not only sending money to Nokia at the rate of 250 million dollars per quarter to help market Lumia. We've heard from many developers of apps, that they dont' want to develop apps for the non-existent user base of Windows Phone, so Microsoft is now bribing developers to port their apps to Windows Phone. So the apps environment is an illusion as well. And that is a huge drain more on Microsoft's profits. The installed base of Windows smartphones in 2007 was 10% of the global market. Windows Phone global installed base today 2% of all smartphones, and that is divided across two incompatible versions, so the best an app developer can hope for, developing for Windows Phone 8, is to reach 1% of the global smartphone user base. Even 'dying' Symbian is 8 times larger. Yes. Symbian's death was announced on February 11, 2011 when Symbian installed base was 6 times larger than Windows installed base in smartphones; but today, two and a half years later, after Symbian has collapsed, for any app developer, Symbian reaches 8 times larger audience than Windows Phone 8 - and WP8 was released almost a year ago, so its not like they are just starting to ramp up sales.
NOKIA WAS COLLATERAL DAMAGE
The Windows Phone experiment is a total, comprehensive and
unrecoverable failure. Any sane CEO sees that immediately. Any smart Chairman
will see that. And Bill Gates is nothing if not smart. He knows numbers, he
knows where to look, and differing from both Ballmer and Elop, Gates knew the
smartphone/handset market better than either of those clowns, and knows, that
when carriers/operators say - now that you own Skype, Microsoft, we will never
let you grow to be a player in this market - they mean it. Nokia was collateral
damage in this case, a bystander, who was hit by a stray bullet. Ballmer wanted
Skype for his internet and PC desktop strategy. It might make sense there. But
that decision killed Windows Phone.
WHAT NEXT FOR MICROSOFT
So what can we expect changes in Microsoft. Focus on the cash cows. Ensure strong Windows 9 push (or 8.2 or whateve is next) and better handling of such minor disasters as the Start Button haha.. And focus on Office Suite, the server side, cloud computing, Xbox, IE, and so forth. But also, a far more ruthless and rapid termination of hopeless projects like Surface and Windows Phone.
So I'd say Microsoft will go through the next 18 months to 2
years more on 'stick to your knitting' and avoid the jerky radical new
directions every few months that were symptomatic of the Ballmer period. No
doubt the new CEO will also have visions of where it goes longer term
(wearables, nanotech, 3D printing, whatever) but expect the Ballmerian projects
to mostly die and at Microsoft, the death often comes unannounced and very
swiftly. Partners beware. Don't deploy any assets to areas of Microsoft that
are now in jeopardy until the new guy is in place and guarantees that project's
Thats my take on Ballmer's departure and our industry today. Part 2 examines the impact to Nokia now, part 3 will discuss a bit about Ballmer's replacement candidates.
PS sorry about long and not very tightly focused and edited article, I did write this for you on a Saturday, knowing some of my readers would want the thoughts as soon as possible. More coming soon. (and yeah, I will return to add the related links etc, but not today, this took enough of my time)