Steve Ballmer holding the $150 Nokia phone.
During the keynote at Microsoft's big developer conference, CEO Steve Ballmer very subtly highlighted what could be the key to the company's future in smartphones.
After talking about two high-end smartphones from Nokia, he picked up a Nokia Lumia 521.
He said, "It too is a beautiful product. This product will be sold outside of the United States. Primarily in countries where the phone operators do not subsidize, that is they do not reduce the price of the phone. But this phone will be sold for just over $150, which is really quite amazing for a product that's this beautiful, this gorgeous, and at this kind of inexpensive price."
Catch that? It's a $150 smartphone that runs a full, current version of the Windows Phone operating system. ( If Apple rolls out a low-cost iPhone, most people think it will cost at least twice as much.)
Microsoft believes that much of Android's market share gains have come in emerging markets, where people are buying cheap phones that run older versions of the operating system. This is part of the reason that Android is still fragmented, with most users on Gingerbread, a three year-old version of the operating system.
Those Android users aren't taking full advantage of the operating system, which is why Apple CEO Tim Cook brags about iOS usage crushing Android usage, despite the disparity in market share between the two operating systems.
If users in emerging markets buy Windows Phones, Microsoft thinks they will actually take advantage of web browsing, email, and apps on the Windows Phone, unlike on Android.
If Microsoft is going to turn around its fortunes in the smartphone world, a cheap Nokia phone could be a good starting point. A $150, fully capable, smartphone is a really good deal.
If the cheap phone sells, then Microsoft will start gaining market share. If Microsoft starts getting some share, then it will be an easy story for the media to tell — Microsoft comes back from the brink of death to grab share. Good press can lead to better sales.
More importantly, if its share goes from single digits to double digits, then developers like Instagram will probably stop ignoring the Windows Phone platform. Once that happens, and Windows Phone gets better apps, then it should lead to more high-end phone sales.
This is all a long shot, of course. There's no reason to think developing markets are any more interested in Windows Phone than the developed markets.
But, attacking the low-end of the market seems like a good idea.
The high-end of the market is basically at saturation, which is why Apple's iPhone business is slowing down.
Microsoft isn't going to take much share going hard after the U.S. market. It has to find the markets where smartphones are still new, and try to get those people on Windows phones.
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