SatNad failure as Lumia income drops over 50% at Microsoft

Maybe little sense duking it out in the budget volume segment

Microsoft Lumia 640 Windows Phone
Dog of a year for Lumia

Analysis Despite focusing exclusively on budget phones in 2015, Microsoft's Lumia revenues fell ... a lot. Year-on-year revenue declined 54 per cent in full year Q1 2015.

We have to extrapolate the volumes from revenue, but assuming the Average Selling Prices (ASP) and the profit margin remained the same, that translates as shipments halving. Or so Windows Central calculates, using those assumptions.

Of course, it's unlikely that ASP remained the same: ASPs are always falling. Margins are being squeezed. And the product mix in Q1 fiscal this year was more skewed to budget models than in full year Q1 2014.

The higher end models such as the 930 and 1520 weren't superseded by newer models, nor were the "mid-range" Lumia 830 and 730 (both excellent devices). By contrast, the budget models gained a boost with the "hero" (that's Microsoft's description) Lumia 640.

But the revenue figure is uncontested, and real revenue is what counts. Don't be surprised or alarmed. It's actually in line with the revised mobile strategy outlined in the summer, in which value phones don't even feature.

If you recall, CEO Satya Nadella promised new Lumia flagships and promise to make phones for businesses, but only "experiences" for "value" punters. We hardly need point out that SatNad himself hardly helped, by sparking a rash of "scaling back dramatically" headlines.

And that strategy, of dumping millions of "low value" consumers, is at least rational. The reasoning is that third-party OEMs will take up the slack. Windows Phone today is free, like Android, but Microsoft's "free" is cheaper than Google's "free", once you factor in the royalties.

We've seen a glut of announcements by OEMs in (mostly) emerging markets, from companies such as Blu, Yezz, Alcatel and Micromax. Even Polaroid showed off a Windows Phone.

But not all of them actually delivered the goods. So there's no sense in Microsoft duking it out in the budget volume segment, just as there's no sense in it duking it out in the budget tablet or laptop segment with Acer.

It's a pity, because nothing gets you quite as nice an experience for £120 as a Lumia 640. But Microsoft just doesn't have the commitment to consumers as Nokia did. Maybe Corporate HQ doesn't really feel that budget Lumia customers are its customers anyway; more like squatters.

What's harder to fathom is why Microsoft didn't make more of the two flagships (and a new budget model) unveiled two weeks ago. The phones were denied their own dedicated event and then shunted into a slot in the first few minutes, so as not to steal the limelight from Surface.

Apparently they tout a superb camera, but Microsoft didn't show any samples during the aggressive "Team Microsoft: Device Police" presentation.

Windows Phone's champion Joe Belfiore, who presented every new Windows Phone event since launch, has just sailed away. Literally. For a year.

Maybe Microsoft is just waiting until the WM10 platform is presentable before it shows off its capabilities, and that looks like it will be next year.®

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