Microsoft, after many failed attempts, gives phones another try
More than two decades ago, Microsoft started designing software for mobile devices. Two years ago, it gave up on phones, conceding that Google and Apple had won the OS battle. On Wednesday, Microsoft reversed course, unveiling a dual-screen smartphone. But rather than push a homegrown operating system in phones, Microsoft has taken up rival Google's Android software, which powers over 2.5 billion devices around the world.
Microsoft, during an event Wednesday in New York, showed off its new Surface Duo, as well as a dual-screen computer called the Surface Neo. The Surface Duo sports two 5.6-inch displays that curve 360-degrees around a hinge and combine to make an 8.3-inch display. The company didn't give many specific details about the device but touted the ability to do things like view your inbox on one half of the device while responding to a specific email on the other.
"We started really with the goal of how can we help make people more productive," Yusuf Mehdi, corporate vice president for Microsoft's modern life, search and devices group, said in an interview after Wednesday's event. "If you're going to have a device that fits in your pocket, and you can do phone calls and you want to run apps ... it made sense for us to choose" Android.
The Surface Duo marks Microsoft's foray back into the world of smartphones after roughly 20 years trying -- and failing -- to position Windows as the phone OS of choice. Opting to make an Android phone now is Microsoft's admission that it's unlikely to make an operating system that powers the bulk of the world's smartphones -- but it still needs to be a part of the mobile world. Instead of controlling every aspect of the device, Microsoft has to be content with its current mission: Getting Office and its other services into as many places as it can, while using artificial intelligence to make everything smarter.
"Coming out with a new version of Windows [OS] on a phone ... when the market's settled on Android and iOS doesn't make sense," Creative Strategies analyst Carolina Milanesi said. "Using Android, which is an established OS with an established ecosystem, and optimizing Microsoft first party apps for it ... is going to be much easier than trying to bring Windows to a phone."
Microsoft's move comes at a time when it's getting harder for companies to sell pricey smartphones. There are really only three major players in smartphone hardware today -- Samsung, Huawei and Apple -- and even those companies have struggled to spur interest in their highest-end devices. People are increasingly buying less expensive models and holding onto them for years.
To address that trend, Apple priced its new mainstream phone, the iPhone 11, at $700, which is $50 less than the initial selling price of its predecessor, 2018's iPhone XR. And Samsung has been expanding its cheaper, A Series offerings around the globe. Microsoft didn't say what its phone will cost when it becomes available in a year. But Mehdi said it will "have a very good value to the price offered."
It remains to be seen whether productivity -- and the Surface brand -- are big enough reasons to woo phone buyers away from Samsung and other handset makers. At least right now, Microsoft may not even care how many Surface Duos it sells. Its move isn't about one phone.
"We think of these not just as products, but the beginning of a new category, dual-screen computing," Mehdi said. "We're in the beginning of a new wave of innovation."
The slow death of Windows Phone
Microsoft, which has long dominated software for PCs, never anticipated how important smartphones would become and how consumers would really use them: with their fingers on touchscreens. For some people, phones -- not Windows PCs -- became their primary means of accessing the internet.
Microsoft built variants of Windows for mobile devices for more than 20 years, starting with Windows CE for personal digital assistants in 1996 and following with Windows Mobile in 2000. The software wasn't designed for touchscreens, and apps felt like PC software crammed to fit smaller screens.
That was exactly what Steve Jobs tried to fix when Apple built the iPhone. Introduced in 2007, the first iPhone featured a full touchscreen and software designed specifically to take advantage of that interface. It was a mobile phone, a music player and an Internet device that fit in your pocket.
Google and its partners, HTC and T-Mobile, quickly followed with the first Android phone, the T-Mobile G1, in September 2008.
Microsoft finally responded in 2010 with its Windows Phone 7 software. The first Windows Phone devices -- largely built by Nokia, which Microsoft bought in 2014 for $7.2 billion -- received accolades from reviewers but found few buyers. Two later versions -- Windows Phone 8 and Windows 10 Mobile -- failed to spur enthusiasm.
At its peak in 2013, Windows Phone managed to control only 3.3% of the global smartphone market, according to IDC. The percentage, while tiny, was enough to make the Microsoft the third-biggest mobile OS vendor behind Google's Android (79%) and Apple's iOS (15%). This year, 87% of the world's smartphones should run Android, according to IDC, while 13% will run iOS. There's no longer a real third option.
Today, over 2.5 billion people actively use Android every month, more than double the number of Windows 10 users and even more than the 1.5 billion Windows users Microsoft claims to have.
For Microsoft and the rest of the tech world one thing is obvious: Google and Apple won the battle to make the software powering the world's smartphones. Not even Samsung, the world's biggest phone maker, could gain traction with its homegrown software, Tizen. There just weren't enough apps that people wanted to use. Samsung relegated Tizen to its TVs and smartwatches -- areas where third party apps don't really matter.
In 2015, Microsoft laid off thousands of people in its Nokia phone business and restructured the operations. The following year, it sold off the low-end phone unit for $350 million to FIH Mobile, a subsidiary of Taiwan-based manufacturing giant Foxconn, and a new Finland-based company called HMD Global. Microsoft co-founder Bill Gates in June said that his "greatest mistake ever" was failing to build the world's biggest "non-Apple" mobile operating system.
In 2017, Microsoft admitted that it was no longer releasing new hardware and features for its Windows Phone OS. And this year, Microsoft will stop making app and security updates for existing Windows smartphones. It recommended that Windows Phone users shift to iPhones or Android devices.
Windows Phone is officially dead. But Microsoft's mobile ambition is not.
Microsoft under Satya Nadella is a much different beast than the Windows-obsessed Microsoft of old. Instead of competing with long-time rivals, Microsoft has opted to partner with them. Five years ago, the company released a version of Microsoft Office for iPhones and iPads, and in January, it put its software in Apple's Mac App Store. Both moves would have been unheard of a decade ago. Nadella made an appearance at Samsung's Note 10 launch in August to talk about a new series of apps and features for the devices, such as OneDrive storage for photos and better syncing between the phone and computer.
And it has been touting how well its services work with Android overall. Microsoft's Your Phone app tightly ties Android to Windows 10, letting users access their phone from within a Windows PC to send and receive messages, notifications and photos. It's also believed to be considering enabling Android apps to run on some of its future Windows devices.
The Surface Duo makes that partnership even stronger.
"This product brings together the absolute best of Microsoft, and we're partnering with Google to bring the absolute best of Android in one product," Microsoft Product Chief Panos Panay said of the Surface Duo during Wednesday's event. "This is industry pushing technology."
Working with rivals has paid off so far. Microsoft has made more than 150 apps for Google devices, five with more than 500 million downloads. As CNET sister site ZDNet noted, more than 1 billion Android users have installed Microsoft Word, and over half a billion have downloaded PowerPoint, Excel and OneNote. Outlook ranks No. 4 in Apple's App Store for productivity apps, while Word ranks No. 8. Offering iOS and Android apps has attracted new users it never would have signed up otherwise.
Microsoft hopes that opting for Android for its phone will bring more people into its ecosystem, without the company having to worry about recreating the apps found in the Google Play store.
"The Surface Duo is a very interesting take on mobile devices that highlights both how smartphones have really morphed into pocketable computers and how the underlying OS for these devices is less and less relevant," Technalysis Research analyst Bob O'Donnell said. "It's all about apps and experiences."
Getting back into phones won't be easy for Microsoft. But if it woos just a few customers, that's more than it has in phones right now. And the bigger play isn't just selling Android smartphones -- it's convincing people that two screens are the future.