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Microsoft Corporation's Mobile Strategy Takes Another Step Forward

By Tim Brugger - Dec 18, 2014 at 4:39PM

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Despite losing ground in the smartphone market, the software king’s plans for mobile go well beyond devices.

When Microsoft (MSFT 1.70%) CEO Satya Nadella kicked off his tenure in February of this year, one of the first things he mentioned was his "mobile-first, cloud-first" mantra. The second of Nadella's two pillars, cloud-related technologies, has been an unmitigated success. With triple-digit growth quarter in and quarter out, Microsoft is already positioned as a cloud leader: One pillar down, one to go.

Much of the angst surrounding Microsoft's $7 billion-plus acquisition of Nokia's devices and services unit involved Apple's (AAPL 2.14%) and Samsung's (NASDAQOTH: SSNLF) dominant position in smartphones. Why play in the same sandbox as Apple and Samsung? Turns out Nadella's mobile-first strategy is a lot more than devices -- a la Apple and Samsung -- as Microsoft has proven yet again with a new service that is perfectly aligned with the cloud king's mobile vision.

All things mobile
Microsoft is rumored to be working on a gaming and app streaming service codenamed Arcadia, which gamers will recognize as one of the planets in the wildly popular Halo game. If all goes according to plan, Arcadia will reportedly give Microsoft mobile users a means to stream not only games, but also a host of apps.

If Arcadia sounds familiar, it's because Microsoft introduced a similar service last year called Rio. However, Rio was exclusively for games, whereas Arcadia includes streaming app functionality, too. An Android version of Arcadia has been put on hold, according to Mary Jo Foley at ZDNet, but don't be surprised to see Microsoft bring it back, along with an iOS-compatible version.

Arcadia is another example of what Nadella's mobile initiative is all about: getting Microsoft-related solutions into the hands of as many mobile users as possible, regardless of OS. Recent examples include introducing Office 365 for iOS, and plans for an Android-friendly version of the productivity tool -- delivered via the cloud, of course.

And Microsoft's mobile strategy doesn't stop with iOS, or even streaming apps and games via Arcadia. Last month Microsoft took the wrapper off of a beta version of Visual Studio (VS) that includes an Android "emulator," giving developers the ability to build, run, and test Android apps via Microsoft's tool. Microsoft also made its software framework, .NET, open source and compatible with industry stalwarts like Linux.

Good news, bad news
According to Gartner's Q3 tally of smartphone sales, you'll find Microsoft in the "other" category. Not surprisingly, Samsung and Apple top the list, though Samsung appears to be losing market share to upstart Chinese manufacturers. Microsoft remains third on Gartner's report measured by OS, but market share actually declined compared to Q3 2013, from 3.6% to 3% this year. Microsoft's OS now runs on over 9 million smartphones around the world, compared to 8.9 million last year.

On the bright side, there is explosive smartphone growth in emerging markets, primarily Eastern Europe, the Middle East, and Africa. According to Gartner, each of the region's smartphone sales jumped nearly 50% compared to 2013, "some of the highest growths ever recorded." With an ever-growing suite of low- and mid-range smartphones, Microsoft is positioned to gain market share in the world's fastest-growing regions.

Of course, Gartner's data is strictly for smartphones, and doesn't include solutions like Microsoft's Surface Pro 3 -- but even if device growth creeps up rather than rockets, that's only part of Nadella's mobile-first plan. As Office 365 for iOS and Android, strategic partnerships, making .NET open source, cross-platform app development tools, and now Arcadia demonstrate, Microsoft's mobile ambitions go well beyond smartphone sales.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Gartner. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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