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Steve Ballmer introducing Windows Phone on the Nokia Lumia handset (BusinessInsider)

Why Didn’t Microsoft Dominate the Smartphone Market?

Tim Ventura
Jul 1, 2020 · 5 min read

Steve Ballmer literally laughed at the iPhone when it came out in June 2007, telling USA Today, “There’s no chance that the iPhone is going to get any significant market share. No chance.”

He’d quit laughing by the time Google Android hit the market in September 2008. By then, he had his developers racing to develop Windows Phone, but by the time it came to market in October 2010 they were nearly three years too late — a mistake that cost Microsoft the mobile market.

The combination of timeline & market position are critical to understanding how Microsoft lost this race. If things had gone just a little bit differently, today’s world would be a very different place. Here’s why:

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Windows Phone was well reviewed, but ultimately failed to capture market share (ZDNet)

How Microsoft Grabbed The PC Market

Bill Gates realized that Apple wasn’t serving the entire market, and jumped on the opportunity by releasing Microsoft Windows over a year later, in November 1985. Windows, paired with an inexpensive IBM “clone”, did nearly as much as the Mac, but for half the price.

It wasn’t long before Windows dominated personal & business computing so completely that it very nearly drove Apple out of business in the 90’s. Ironically enough, it was Microsoft itself that bailed Apple out financially in 1997, prompting Steve Jobs to publicly thank Bill Gates — and simultaneously planting the seeds for Microsoft’s future downfall.

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Thirty years ago the Macintosh changed computing, but was too expensive for many users. (Forbes)

Apple Creates Modern Mobile Computing

At this time, back in 2007, Microsoft was still “king of the hill” in terms of computing. They were dealing with fallout from Windows Vista performance & security issues, busy making inroads into corporate data-center servers, and simply didn’t take the iPhone seriously.

As Steve Ballmer famously said in that 2007 USA Today interview, “Would I trade 96% of the market for 4% of the market? I want to have products that appeal to everybody.” Microsoft was on top, making deals so big that creating a new “smartphone” wasn’t even on their priority list. When Jobs rolled out the iPhone, Steve Ballmer’s biggest concern was making sure that his 85 year-old uncle bought a Zune media player.

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Even Steve Jobs didn’t predict how successful the iPhone would become (Wired)

History Repeats Itself: Almost

Two years after Apple had successfully proven the market need for smartphones, Google released the Android operating system, and it wasn’t just inexpensive — it was free. That left Microsoft with no marketshare, and by the time they got Windows Phone to market, developers were already busy filling up the app stores for Android & IOS. Microsoft had difficulty finding hardware manufacturers, and an even harder time finding apps for a mobile operating system with no users.

Instead of history repeating itself, it was game over for Redmond — the lack of hardware, apps & product momentum left them effectively locked out of the mobile device market, and Windows Phone struggled to find traction until Microsoft eventually discontinued it in 2017.

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“Different priorities” hampered Microsoft’s ability to catch up to Apple & Google. (Softpedia News)

What Did Microsoft Miss?

Next there’s Google. By 2008 they’d already exceeded $21 billion in annual revenue, but it was entirely dependent on other company’s browsers & operating systems— a weakness they were keenly aware of. The launch of the Chrome browser in September, followed by Android in October of 2008 was a big step in securing their revenue stream.

Finally comes Microsoft. Why so late? Back in 2007, Redmond was busy launching the long-overdue Windows Vista and making record profits with enterprise sales & Xbox consoles. Ballmer’s response to USA Today indicates that he viewed the iPhone primarily as a media-focused information appliance, making it a niche market product that was easily overlooked.

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Smartphone erosion of the PC market was apparent even by 2010. (MarketWatch)

The Only Constant Is Change

Losing the mobile market was a major setback for Microsoft, but it’s a cloud with a silver lining. Humbled by their failure, Microsoft went through a period of soul searching & organizational transformation that led to new products, markets, and revenue streams — ultimately benefiting the consumer as they began to embrace SaaS models, cloud computing, and other advances.

Through hard work, flexibility & perseverance, Microsoft regained its stature in computing, and by 2018 the Redmond giant was running neck and neck with Apple for the enviable title of “the world’s most valuable company.”

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Tim Ventura

Written by

Futurist, marketing executive and sometime writer with 25+ years of industry experience and a passion for the future. https://www.linkedin.com/in/timothyventura

Predict

Predict

where the future is written

Tim Ventura

Written by

Futurist, marketing executive and sometime writer with 25+ years of industry experience and a passion for the future. https://www.linkedin.com/in/timothyventura

Predict

Predict

where the future is written

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