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Microsoft just gifted the world’s most promising mobile phone market to Google

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Reuters/Anindito Mukherjee
Google and Microsoft would rather they were using their own smartphones.
By Leo Mirani

Reporter

Published This article is more than 2 years old.

Feature phones—those things without touchscreens or internet connections known colloquially as dumbphones—aren’t dead yet. But if Google and Microsoft get their way, they are are not long for this world. Smartphones outsold feature phones for the first time in 2013.

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This week, Microsoft announced mammoth job cuts. The Verge reports that as part of the reorganization, Microsoft will move away from Nokia’s lines of smart-ish and feature phones. According to TechCrunch, that includes its most basic entry-level devices as well. (Microsoft declined to offer comment, referring Quartz to the fourth paragraph in ex-Nokia CEO Stephen Elop’s email to Microsoft employees.) Instead, the focus will be on smartphones using the Windows Phone platform.

This seems a clear sign of retreat. Nokia is still the world’s second largest selling mobile phone brand—it sold a quarter of a billion units in 2013—and the large majority of those are dumbphones. Unless Microsoft can quickly drive down the price of Windows phones, it risks losing Nokia’s huge brand advantage—and potential network effects for future smartphone buyers—in markets it created and led for years. While smartphones are undoubtedly the future in India, for example, they accounted for less than 20% of all mobile phones shipped in 2013.

Many of those customers will now go to Samsung, which is the world’s largest selling mobile phone brand, with dumbphones making up a third of the 444 million phones its sold last year. Or maybe not. Amir Efrati of the The Information, a tech news site, reports that (paywall) Google will spend “at least several hundred millions dollars” to promote its AndroidOne phones in India. According to Efrati:

Google representatives told a potential partner last year that the company might end up spending $1 billion overall for its India efforts, including subsidizing the hardware so the phones could retail for less than $100.

As Quartz has explained before, India is the most important battleground for mobile companies right now: With smartphone penetration hovering at 10%, it is the single largest market for first-time smartphone buyers. Every company with any ambition is focusing on India right now, including homegrown Micromax and China’s Xiaomi—both of which use the Android platform. Micromax is one of the companies picked by Google to use its AndroidOne specifications. Meanwhile, Nokia famously has real brand equity and distribution advantages in India, which could have been a real asset for Microsoft. Now it risks throwing years of work away.

With this week’s announcements, it is almost as if Microsoft is willingly ceding ground to Google. Or it may be the beginning of a bloody battle.

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