Andy Lees, the man at Microsoft tasked with turning around mobile—and essentially saving the company—has an impossibly difficult job. To succeed, it's going to take patience, tenacity, and the ability to invent a whole new business model.
Microsoft's mobile software is going to arrive late to the party. It's going to have a hard time attracting hardware partners. And even if it is a smashing success, it will still equate to a paltry share of Microsoft's overall sales.
The software is already very late
Microsoft is basically taking the year off as far as mobile is concerned. Its next generation of mobile software, Windows Phone 7, won't be ready until the holiday season. There's no point in buying a Windows Phone today, because you won't be able to upgrade to the Windows Phone 7 operating system.
Taking a year off in mobile is a huge hurdle. The pace of innovation on both the hardware and software sides is breathtaking. Just look at what Google rolled out for Android last week, and what Apple will roll out this summer.
Microsoft will struggle to get good devices
When Microsoft does finally start selling its Windows Phone 7 software and handsets, it will be far behind the competition. If it starts behind the competition, then it's going to have a hard time selling handsets.
If it can't sell many handsets, it's going to have a hard time convincing partners like HTC or Sharp or Samsung to build its software into really cool devices.
If it can't get really cool devices, then it doesn't have any advantage over Google or Apple
Microsoft won't make much money on mobile in the current strategy
Okay, okay. Those are scary theoretical scenarios. Maybe they're wrong!
Let's say somehow Microsoft manages to build great, competitive software. Let's also say it manages to get really cool handsets.
But, even if both of those things happen, Microsoft's mobile division will remain tiny for the company — especially in context of giant Windows division.
We ran the numbers on Microsoft's mobile business in February. At best, Microsoft will generate $600 million from mobile software sales. At worse, it will generate $63 million. In reality, it probably lands somewhere in between, around $300 million. That's just 0.5% of the total revenue Wall Street expects from Microsoft next year.
So even if Microsoft's phone operating system isn't a flop for an adoption perspective, it will be a flop from an economic perspective. Especially if the mix of Windows licenses sold shifts toward mobile over the next several years.
Of course, Microsoft can't just give up on mobile because the sales numbers will be small. Apple and Google are using their mobile operating systems for tablet computing. The growth in tablet computing is a massive threat to Microsoft's Windows domination.
So, in the long term, making tiny revenues big is another challenge for Andy Lees. If Microsoft isn't going to become a hardware maker like Apple, then Andy needs to figure out how to make more money from mobile. (Buy RIM?)
If you're Microsoft, this is the scariest thing yet. Andy Lees seems to be an okay guy, but we have yet to hear him described as visionary or innovator. Same with Steve Ballmer. He's a solid operator, but not a visionary or innovator.
If Microsoft is going to challenge Apple and Google in mobile, it needs Steve and Andy to radically transform themselves into different people.