Rumors are swirling that Microsoft (NASDAQ:MSFT) might kill off its underdog mobile platform, Windows Phone. However, investors should take those reports with a grain of salt, since the source of the rumors is the Twitter account of self-proclaimed industry leakster MSFTNerd. Reports are claiming that Microsoft will replace Windows Phones with forked Android devices preloaded with Microsoft apps.
The idea isn't too far-fetched. Windows Phones account for less than 3% of all smartphones worldwide, according to IDC, which limits Microsoft's ability to reach mobile users. To expand that presence, Microsoft signed partnerships with Android handset manufacturers to preinstall apps like Office, OneDrive, and Skype onto new smartphones as potential replacements for Google's apps. If Microsoft "forks" Android by removing Google services completely, it could offer users Google-free Android phones tethered to its own ecosystem. In addition, it would be easier for developers to upload the same app to Google Play and Microsoft's mobile app store.
That sounds like a fiendishly clever plan, but I seriously doubt that Microsoft will kill off Windows Phone anytime soon, due to four main reasons.
1. "One Windows"
With Windows 10, Microsoft intends to unite phones, tablets, PCs, gaming consoles, and embedded devices under a single, scalable operating system. For example, a PC user will see a desktop and a Start Menu filled with tiles, while a smartphone user would use those tiles as a primary UI. Furthermore, Microsoft has stated that Windows Phone 8.1 devices will be automatically upgraded to Windows 10.
With the new Continuum feature, Windows 10 Mobile smartphone users can plug their device into a larger screen, and the phone's display automatically converts into a full desktop. This means that high-end Windows Phones could potentially replace desktop PCs in the near future. Although Microsoft has an anemic share of the smartphone market, Windows still runs on over 90% of PCs worldwide. In other words, Microsoft is wisely leveraging its strength in PCs to boost its market share in smartphones.
Abruptly discontinuing all Windows Phones, however, would be inconsistent with that long-term strategy.
2. It's all been done before
Shortly before being acquired by Microsoft, Nokia's handset division launched the Nokia X and XL, two forked Android devices which ran a modified version of Android that resembled Windows Phone. Nokia believed that those low-end devices could bridge the gap between Android and Windows Phone, and possibly convert Android users to Windows Phone ones.
Unfortunately, Nokia failed to understand how easy it was to root Android while underestimating user demand for Google apps like Maps and Gmail. Shortly after the Nokia X and XL launched, users rooted both devices and installed Google services. After Microsoft closed its acquisition of Nokia's handset division, it was ironically left with two Android devices which were tethering some users to Google's services. Shortly afterward, Microsoft discontinued both phones.
3. It already has plenty of Android allies
After the failure of the Nokia X experiment, Microsoft became smarter about tackling Android. That's why it enlisted Android OEMs to preinstall its apps instead. This gives Android users an alternative to Google's own apps, but Microsoft doesn't need to manufacture Android devices which could be rooted and tethered to Google's ecosystem.
Microsoft already has a massive list of partners. In March, it signed strategic partnerships with nearly a dozen Android OEMs, including Samsung and Dell, to preinstall its apps on Android devices. In May, it signed similar agreements with 20 more Android OEMs, including Sony and LG.
With that many partners helping it stick thorns into Google's side, it would be silly for Microsoft to launch a first-party Android handset to compete against its new allies.
4. Easier access to iOS and Android apps
Lastly, Microsoft stated that it will be easy for iOS and Android developers to port their apps to Windows 10 via a security container subsystem. iOS and Android developers, who previously shunned Windows Phone's tiny market, might be tempted to port their devices into the "One Windows" ecosystem to reach tablets, PCs, and Xbox Ones.
If that happens, Microsoft could reduce the "app gap" with Apple and Google, and Windows 10 Mobile devices would get the best of all three worlds. Axing Windows Phone before all this happens would be absurd.
The bottom line
I believe that current rumors about Microsoft "killing" Windows Phone are likely related to earlier reports that Microsoft was eliminating the Nokia and Windows Phone brands. Yet that change already occurred, when Microsoft rebranded all its devices under the Lumia banner last year. Looking ahead, Microsoft might call its new smartphone "Windows 10 Mobile" devices instead of "Windows Phones," but I doubt that Microsoft will kill them off to make Android phones instead.