By Shira Ovide And Thomas Gryta
Microsoft Corp. has a new fix-it plan for the company's
smartphone business: Wait a little longer.
Microsoft's $9.4 billion purchase last year of Nokia Corp.'s
mobile-phone business was billed as a way to revive Windows Phone,
the company's four-year-old smartphone operating software. So far,
Microsoft has fallen further behind.
The share of smartphones shipped last year that were Windows
Phone devices slipped to 2.7% from 3.3% in 2013, according to
research firm IDC. The company of late has released mostly budget
phones, a sector where growth is promising but competition is
fierce. Many popular mobile apps aren't available on Windows Phone
or are subpar compared with versions for iPhone and Android
devices.
On Monday at Mobile World Congress, a major telecom-and-tech
trade show in Barcelona, Microsoft unveiled two midrange phones
targeted at emerging markets. Meanwhile, rival Samsung Electronics
Co. generated buzz by launching a high-end phone.
Microsoft critics say the company is stuck in no-man's-land,
between Apple's pricey smartphones and the wide range of phones
powered by Google Inc.'s Android operating software.
Microsoft officials say the company is playing the long game.
It's pinning its hopes for mobile revival on Windows 10, the next
version of its operating system, which is expected to debut later
this year.
Satya Nadella, in his first year as Microsoft CEO, has done much
to put the company on good footing, even as Windows has continued
to lose relevance in mobile and personal-computing markets. But
Microsoft's fortunes will be dimmed seriously if it can't get
traction in smartphones, which are fast becoming essential or
primary computers in many consumers' lives.
Stephen Elop, the former Nokia chief executive who oversees
Microsoft's devices group, says Microsoft is comfortable waiting.
The pause in rolling out new, high-end devices is part of a planned
strategy, and doesn't reflect any internal development issues, he
said in an interview with The Wall Street Journal Monday. He
promises a new flagship Windows phone will be on sale by
year-end.
"It is a conscious decision to launch into the flagship tier
with Windows 10 and new flagship devices," he said.
The upcoming Windows version will, for the first time, serve as
a common software backbone for personal computers, phones and
tablets. The idea is to attract people who already use Windows on
their computers. Microsoft is betting they will find it helpful to
use a Windows Phone in tandem with their PC.
Mr. Elop said the software unification under Windows 10 will
enable software developers to make applications that run seamlessly
on all Windows devices, giving developers access to an alluring
potential market of hundreds of millions of Windows PCs, phones and
tablets, he said.
But some of Microsoft's refrains about Windows Phone are
familiar. The company has repeatedly refashioned its smartphone
system and pledged each time that Windows Phone was on the cusp of
its breakout moment. "People all over the world are about to fall
in love with Windows Phone, " Steve Ballmer, then Microsoft's CEO,
said when the company upgraded the smartphone software in October
2012.
This time, there are early signs Microsoft may have a compelling
pitch for Windows Phone, particularly in business settings, said
J.P. Gownder, a Forrester Research analyst. Microsoft also has
talked about providing sophisticated security that should appeal to
corporations worried about their employees roaming around with
vulnerable company data on their phones.
With Windows 10, "there could be a different argument to make,"
Mr. Gownder said.
Write to Shira Ovide at shira.ovide@wsj.com and Thomas Gryta at
thomas.gryta@wsj.com
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