How did Microsoft squander their lead (that they apparently had) in smartphones?

Yeah, the paucity of apps for the newest versions of Windows Phone is a serious problem. How serious it is probably depends, I don’t think it’s the reason WP despite being much improved hasn’t caught on. Most people use a small handful of apps, and WP does have most of those. In fact, some of the more popular apps that weren’t interested in writing their own version for Windows Phone (because of the development time commitment), Microsoft actually offered the companies involved to write a version of the app for them at no charge. I had a Windows Phone for awhile (I use an iPhone now) back when WP8 first came out and I know that Spotify was an example of such an app. Microsoft also sometimes did this without the permission of the app owner, for example they created a YouTube app without Google’s permission that even included features Google specifically didn’t want (like integrated ability to download videos and block ads for example.) In general you can legally write clients that load another company’s service as long as you’re just grabbing publicly accessible interfaces into that system and wrapping it in your application, but Microsoft ended up degrading their app due to legal threats from Google.

I think the biggest reason is just that Apple and Google got big first, and then implemented stuff that makes it a pain to switch. Both OSes have significant Apple/Google services that are tightly integrated with using their mobile OS and that aren’t as easy to use on another platform (and sometimes you can’t use at all, depending.) On top of that many casual users just like a UI they’re comfortable with, and that’s a big thing as well. It’s the same kind of inertia that creates those lifelong “Ford” or “GM” families, even when certain model years they may clearly not be even close to the best option on the market, they still buy from the company they’re loyal to.

The Register might have reported it, but the data came from a single analyst group called 1010data.

I’m sorry to point this out, but you have misread important details of what that group concluded. The 45% and 17% are numbers for the month of October only, not the whole year. For the trailing 12 months, 1010data claims Apple was largest tablet vendor at 34%, while Microsoft has 19%. Also, the fact that the sales spike coincided with the release of new hardware in October isn’t exactly coincidental. As far as I know, they haven’t released any more information to indicate if those numbers were only temporary or more permanent.

But that doesn’t matter really because the data collected by 1010data is heavily skewed. It includes online sales of tablets only. In other words, it specifically excludes all sales from brick and mortar stores, like the Apple Store. I have no data as to what iPad sales are from Apple Stores, but when you look at how packed and profitable they are, it’s not outlandish to say that this exclusion makes their iPad data meaningless. Also, the study did not include non-US sales nor enterprise sales, 2 markets where iPads almost assuredly sold much better. They are undercounting a great number of iPads.

But the most important thing is this- no one knows Surface sales numbers except Microsoft itself because Microsoft has never publicly released any Surface sales numbers. So we won’t really know if Surface has enjoyed strong sales until Microsoft tells us.

The Lumia 950 phone does seem to have better hardware specs than iPhone 6.

1440 x 2560 vers. 750 x 1334 screen resolution
20 megapixels vers. 12 megapixels camera
32GB ram (+ microchip) vers. 16GB (in the base version)
Battery lasts longer

Okay–thanks for the clarification, I hadn’t read the article very closely, admittedly. At the same time though, I do read the tech press quite a bit and everything I’ve read has been largely positive for the Surface Pro/Surface line since the 3rd iteration. Both in positive reviews of the devices themselves and in their sales numbers. If like you say Microsoft was say, 19% of online sales of such devices in 2015 that’s actually a massive improvement. The real failure for Surface was in trying to compete with the iPad, which was their Surface RT line–those did so poorly that Microsoft pulled them and hasn’t manufactured one in several iterations of the devices.

Of course, the real point is that the current Surface line (since v3) runs full desktop Windows with no restrictions. It’s marketed and intended largely for “sit at a desk with a keyboard” use, and thus really isn’t a comparable tablet to the iPad. It’s in a different market, essentially. It’s really more like a notebook, but in functionality and price point. It doesn’t even run a mobile OS, so that makes it fundamentally different from Android or Apple tablets.

Essentially I’d argue that Surface 3 and later need to be compared with the MacBook Air and similar lines of ultraportable laptops instead of the iPad. They don’t run mobile chipsets, they don’t run a mobile OS.

But it’s not a massive improvement necessarily because the study still underreported (probably to a very large extent) the number of iPads sold, meaning the Surface number is probably much lower than 19% and the iPad number is much higher than 34%. Basically, it appears to me that their methodology totally sucked and I wouldn’t put any faith in their numbers at all.

I’ve seen generally positive reviews of the Surface too, but I can’t recall having seen anyone in the tech press say anything meaningful about sales.

Well, this is still a young market and I’m not yet sure there is a fundamental difference. What difference does a chipset or an OS make if it lets you get the job done?

The problem is those hardware specs are, for the most part, meaningless in the real world. A smartphone/computer/car/whatever is more than the sum of its specs. The mega/giga bullet point race goes nowhere.

Well, I mean “massive improvement” is subjective. I think a couple years ago I read Surface sales were $400bn, and now they’re up a good bit. They’re up a decent bit from last year. Is the Surface outselling the iPad? No–that’s a misconception I had based on reading an article I shouldn’t have relied on. But the Surface’s sales have been trending up and it’s a profitable device for Microsoft. That’s very different from their phone business, which is an unprofitable disaster. They paid something like $8.5bn for Nokia’s phone business and IIRC they’ve largely had to right that off now.

I looked up Microsoft’s financial filings so we aren’t going off journalist reported numbers. In 2015 Surface revenue is up 65%, to $3.6bn, so this is now a billion dollar business. It’s also profitable, which is rare for Microsoft in devices (for example despite high revenues its Xbox line has always struggled to actually be profitable.)

By comparison, Apple noted in its 2015 annual filing (which doesn’t cover the same calendar months as Microsoft, since the companies have different fiscal years), that net iPad sales are declining. But it’s still $23.2bn/yr business, albeit down from a $30bn/yr business, it’s also trended down, since 2013 when it was a $32bn/yr business.

It doesn’t make a difference per se, but it matters in terms of making business analyses. While iPads are being used for work, they tend to be used for very different types of work than a ultraportable laptop. You’ll see iPads in the hands of retail workers, who need something they can use on their feet, or sitting in a stand at a POS kiosk (replacing desktop computers with touch screens), or a traveling worker checking emails and etc.

Surfaces are more replacing the laptop for people who travel a lot but who still, when they aren’t in a plane, tend to do their work sitting at a desk–a place where a monitor, keyboard, and mouse are vastly better than a touchscreen interface, and where a mobile OS is frankly too limiting.

I think people are also forgetting how radically different the first iPhone was. Only one physical button on the front. Battery built in and not user changeable. And for the time its screen was massive and much higher resolution than anything else available.

Microsoft was arrogant and thought it would fail, they thought people wanted physical buttons to dial and ability to swap batteries, as well as the business features that have been already mentioned. The combination of that and the fact they insist on trying to make one OS across all platforms is what killed the chances of Windows Phone.

Apple is going the other direction. They now have four distinct OS. OS X, iOS, WatchOS and TvOS. All of them share a common base and very similar libraries but you have to create specific apps for each one. I believe thats the correct strategy and the market seems to prove me right. Microsoft just will not accept this and keeps trying to ram a common OS down everyones throat, everyone to the detriment of desktop users. Just look at the reception to Windows 8. It was clearly aimed at touch users and actually made things worse for desktop users, and the users hated it.

I really don’t mean to be a pedantic dick about this, but do you have any non-anecdotal data to back that up? I haven’t seen any official numbers at all about iPad or Surface sales in enterprise/business specifically, so I couldn’t say what sectors they are more or less popular in.

Also, Surface revenue was down about 25% YoY last quarter. Granted, it will probably be up this quarter since they released new hardware, but it’s not all smiles and sunshine.

No.

Last quarter is a small snapshot of the business though, there’s a reason I excluded 2016 1Q results.