Ruthless Microsoft's Smart Decision To Kill Windows Phone

The death of Windows Phone is not a symptom of a poorly Microsoft, it's one of the most promising signs that CEO Satya Nadella has turned the company around to a new way of thinking.

With only 4.5 million Lumia devices sold in Q4 2015, Microsoft' mobile hardware reached the heady heights of a 1.1 percent market share. The guiding principle of 'cloud-first mobile-first' is evident in Microsoft's approach - and the key takeaway is that it says 'mobile' and not 'Windows Phone' (or even 'Windows 10 on s smartphone').
Microsoft Lumia 950 and Lumia 950 XL (image:Ewan Spence) Of course Microsoft's mobile hardware ambitions (then with Windows Phone, now with Windows 10, but always with the Lumia brand name) have been on the slide for some time. The appointment of Satya Nadella as CEO brought a renewed focus on getting everyone to use Microsoft's cloud-based software platform, moving away from the blinkered view of using only Microsoft's own hardware platforms.
In theory Windows Phone could be licensed, but in practice Windows Phone was all about running Microsoft's code on Microsoft's hardware. Consumers had to want Microsoft's services and be prepared to buy and use Microsoft approved hardware. For smartphones that meant living with Steve Ballmer's view of mobility: 'if you want to use Microsoft you have to buy everything from us.'
That's no longer the case. If you want a Microsoft service and you have an iOS or Android device, then you'll have access to Microsoft's cloud, you can use your music subscription, you can sync OneNote, you can use all of Microsoft Office. The cloud is no longer limited by your hardware or operating system choices.
It's far more accessible for Microsoft to offer its services and software on iOS and Android than the old strategy of ignoring the dominant mobile platforms to force people into Windows Phone. Nadella's move to put the cloud first, no matter the device the consumer has, is not only commendable, but has given Microsoft a long-term strategy that doesn't rely on wishful thinking.
Microsoft CEO Satya Nadella (image: Photographer: David Paul Morris/Bloomberg) Microsoft continues to lose money on every Lumia device sold, but it makes a profit on the users in its cloud-based system. It has lifted the average revenue per Windows 10 user significantly compared to the income from  Windows 7 and Windows 8 users. Minimzing losses, pursuing ongoing revenue from users, and maintaining a presence on mobile is the key to its future.
Windows Phone bridged a gap and kept Microsoft involved in the mobile space as it worked on a new company-wide (and arguably internet-wide) strategy. With Windows 10 coming on-stream on the desktop that mobile that bridge is no longer needed. Hence the drop in numbers on Lumia sales witnessed in Q4 2015.

Microsoft makes money from users. It's making more money from them on Windows 10 than on other platforms. But if a user is not on a Windows-based OS, Microsoft can still offer them services and find the profit. Windows 10 is one gateway to its cloud, no matter if it is in a smartphone, an OEM laptop, or the latest Surface tablet (or even Surface Phone). Nadella has made sure that Windows 10 is not the only gateway.

Windows Phone is dead. Lumia can fade away. But Microsoft has already moved on.