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Microsoft Corporation's Continuum Is Game-Changing, but No One's Excited

By Leo Sun - Oct 19, 2015 at 10:39AM

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Will Microsoft’s Continuum fail to make a splash in the mobile market?

One of the most fascinating Windows 10 features is Continuum, which transforms a Windows 10 Mobile smartphone into a full desktop PC via a $99 Display Box. The user simply plugs the phone into the Display Box, and the mobile OS scales up to a Windows 10 desktop environment to be used with a mouse and keyboard. Microsoft ( MSFT 0.98% ) recently announced that its new phones, the Lumia 950 and 950 XL, will work with Continuum when they arrive in November.

Source: Microsoft.

As revolutionary as Continuum sounds, there are two big catches. Continuum only works with higher-end Windows 10 Mobile devices, like the new Lumias, instead of all Windows Phones. Meanwhile, only "universal apps" in its Windows Store, not older Windows software, will run on Continuum. Universal apps work across smartphones, tablets, PCs, and the Xbox One, and the user interface changes depending on the platform.

Despite those drawbacks, Continuum represents a huge leap toward a universal computing device that can simultaneously replace a smartphone, tablet, and PC. Yet many customers are likely more excited about the latest iPhone than this unique feature. Let's discuss why Continuum hasn't attracted widespread interest yet, but how things might change in the near future.

A brief history of "universal" computers
Microsoft isn't the first company to push for universal devices to straddle the mobile and PC markets. Back in 2011, Motorola launched the Atrix 4G, a smartphone that docked into a laptop-like dock, and transformed into a netbook. When docked, the user could access a Linux-based desktop and access the phone's apps with a Mobile View app. The device eventually flopped because Android apps at the time weren't suited for desktop use, while the Linux-based desktop wasn't as productive as Windows machines.

That same year, Asus launched its first Transformer device, an Android tablet that could convert into a laptop by docking into a keyboard. A year later, it introduced the PadFone, an Android smartphone that slid into a tablet, then docked into a keyboard to become a full laptop. Both devices were ambitious, but they only appealed to customers who needed to replace all those devices at the same time. Android also wasn't as well suited for productivity apps as Windows.

The Motorola LapDock (L) and the PadFone (R). Source: Company websites.

In 2013, BlackBerry ( BB 1.01% ) flirted with the idea of docking its phones into desktops. At the time, then-CMO Frank Boulben told Reuters that users would soon be able to plug the Z10 directly into a docking station to connect to a keyboard, mouse, and screen. "Combined with cloud services, this would mean you don't need a laptop or a desktop," Boulben boldly declared. Unfortunately, BlackBerry's hardware troubles and an executive shakeup left that plan abandoned.

Can Microsoft succeed where these companies failed?
At first glance, Microsoft's Continuum could have a tough time succeeding where those companies failed. Microsoft's Windows Phones currently control less than 3% of the worldwide smartphone market, according to IDC.

The most popular Windows Phones are low-end ones like the Lumia 520, not pricier flagship devices. This means that the Continuum-compatible Lumia 950 and 950 XL, which respectively cost $549 and $649, could only reach a small percentage of that tiny market. If Microsoft offers Continuum for all Windows 10 Mobile devices -- which might happen later -- the impact could be much greater. Relaxed BYOD policies, which encourage iPhone and Android device owners to use their devices at work, could also throttle Windows 10 Mobile's growth in enterprise.

Despite those challenges, Microsoft still has lots of momentum in the enterprise market. Robust sales of Surface devices, which jumped 117% annually last quarter, reveal strong enterprise demand for two-in-one devices that straddle the mobile and PC markets. Companies are purchasing Surface Docks to convert the devices into full desktops, so it's possible that companies could do the same for Windows 10 Mobile devices. Forward-thinking companies might even consider replacing aging PCs with Continuum-ready Windows 10 Mobile devices instead of two-in-one Windows 10 devices.

Game changer, or missed opportunity?
If Microsoft had a meaningful market share in smartphones, Continuum would be a definite game changer for personal computing. Unfortunately, mainstream and enterprise customers have mostly ignored Windows Phones, which means that high-end Windows 10 phones -- and their killer Continuum feature -- could slip by unnoticed.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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