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Microsoft Is Finally Killing Windows Phone

By Evan Niu, CFA – Updated Jul 12, 2017 at 3:57PM

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Long live Windows 10 Mobile?

This has been a long time coming, but Microsoft (MSFT 0.13%) has finally made it official: The software giant is ceasing support for Windows Phone 8.1, effective today. The mobile operating system never truly got off the ground, and it always had trouble garnering more than a couple of percentage points of market share while iOS and Android took over. The news comes three years after Windows Phone 8.1 was introduced.

As of last month, Windows Phone 8.1 comprised nearly 75% of all Windows Phone devices, according to AdDuplex. When you add earlier versions 7 and 8.0, that figures climbs closer to 80% -- meaning the newest Windows 10 Mobile represents just 20% of Windows-powered smartphones.

Renderings of the Lumia 950 and 950 XL

The Lumia 950 and 950 XL, which were introduced in 2015. Image source: Microsoft.

This was inevitable

For those paying attention, the news will hardly come as a surprise. After all, Microsoft killed off its own smartphone operations two years ago, which it had acquired from Nokia, eating a $7.6 billion writedown in the process. Remember that the whole reason Microsoft bought Nokia's handset business was that Nokia was single-handedly carrying Windows Phone in terms of hardware.

That's not to say that Microsoft is giving up completely on smartphones, despite all the evidence that it probably should (Kantar estimated in January that Microsoft's smartphone market share had fallen below 1% in the U.S.). Windows 10 Mobile is still alive but not well.

While Microsoft hasn't been prioritizing Windows 10 Mobile in terms of development resources -- which led to some speculation earlier this year that the company was also abandoning the rebranded operating system -- Windows 10 Mobile should still be supported for the foreseeable future.

The big difference is that Microsoft is effectively reverting back to its time-tested model of focusing primarily on the operating system while leaving hardware to its stable of experienced partners, letting them do the heavy lifting in terms of manufacturing devices.

Microsoft still sells Lumia devices that run Windows 10 Mobile, but it seems clear now that it's more worthwhile to focus its first-party hardware efforts on primary computing devices like the new Surface Laptop. The most recent Lumia 950 was introduced in 2015, and the company has suggested that it may not have newer versions in the pipeline.

Better ways to play

It might be a tough call, but Microsoft would be better off calling it quits in mobile operating systems. Instead, a more prudent route would be to focus on all the other ways that Microsoft can build its business on the backs of other platforms, a cross-platform strategy that the company has embraced under CEO Satya Nadella.

It doesn't need to own the operating system in order to be successful. Office remains among its most important businesses, and Microsoft has done a good job in developing and maintaining iOS and Android versions of Office to strengthen the franchise. There's a good chance that Windows 10 Mobile will eventually suffer the same fate, which underscores why it's so important for Microsoft to come up with other cross-platform ways to earn a spot on your smartphone home screen.

Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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