Microsoft (NASDAQ: MSFT) lost even more ground in mobile during its most recent quarter, posting a whopping 57 percent drop in Lumia sales year-over-year. The company sold only 4.5 million Lumia devices during the quarter, down from 10.5 million during the final quarter of 2014.
That plunge isn't entirely surprising, of course, given the company's recent strategy of focusing on the larger Windows 10 ecosystem rather than pursuing mobile more narrowly. But Microsoft's quarterly results nonetheless led to headlines proclaiming "Windows Phone is dead" and observing that the smartphone market is once again a "two-horse race" between iOS and Android.
It's true that Gartner recently pegged Windows Phone's worldwide market share at a mere 1.7 percent, down from 3 percent a year prior. And CEO Satya Nadella conceded in December that penetration rate was unsustainable, adding that Microsoft envisions a world where devices matter less than the services that are accessed through them. Likely as a result, Microsoft continues to build more apps and services for rival platforms like Apple's iOS and Google's Android.
But Microsoft's bottom line in the fourth quarter was boosted by its lineup of Surface devices, which generated $1.35 billion in revenue during the quarter, up 29 percent year-over-year. And that success may eventually provide a path back into the mobile market for Microsoft.
Indeed, Windows Central reported last month that Redmond is planning to launch a premium handset under the Surface brand in the second half of this year. Intel is reportedly partnering on the flagship phone, and the Microsoft team that helped produce the Microsoft Surface is said to be tasked with developing the phone.
Microsoft is clearly not giving up on mobile -- it continues to refer to itself as "the leading platform and productivity company for the mobile-first, cloud-first world." While its ambitions in mobile hardware have been scaled back in the wake of the Nokia acquisition debacle, it has positioned Windows 10 as a cross-device platform for phones as well as laptops and tablets.
Developers may become more interested in the Surface as sales ramp up. That interest could extend to a Surface phone, helping Microsoft address the "app gap" that has long plagued its mobile business.
- see this Microsoft press release
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