Windows Phone Haunts Microsoft CEO Satya Nadella 6 Years After He Gave Up On It: 'One Of The Most Difficult Decisions I Made'

Microsoft Corp. MSFT CEO Satya Nadella has admitted that giving up on Windows Phone and mobile was a mistake, exactly six years after the company bowed out of the smartphone industry.

What Happened: Nadella revealed that giving up the keys to the smartphone industry to Apple Inc. AAPL and Alphabet Inc.'s GOOG GOOGL Google was a mistake, in an interview with Business Insider.

Microsoft announced its decision to shut down Windows Phone in Oct. 2017. This was two years after the company wrote off its $7.6 billion acquisition of Nokia Oyj's NOK smartphone business.

"The decision I think a lot of people talk about – and one of the most difficult decisions I made when I became CEO — was our exit of what I'll call the mobile phone as defined then," Nadella said.

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Nadella's decision to kill Windows Phone and exit the highly competitive smartphone industry was evident back in 2016 when the company left Windows 10 Mobile unfinished. It managed to sell only 4.5 million Windows Phone devices during the Dec. 2015 quarter, compared to 400 million phones sold overall.

"In retrospect, I think there could have been ways we could have made it work by perhaps reinventing the category of computing between PCs, tablets, and phones," Nadella added.

Since then, Microsoft has made another half-hearted attempt at a smartphone with the Android-powered Surface Duo and Surface Duo 2. However, it's not clear if the company has plans to launch a new phone now. The lack of software updates for its existing phones also suggests there might not be a successor.

Why It Matters: Microsoft has fumbled repeatedly when it comes to smartphones. The company's co-founder and former CEO Bill Gates termed losing to Android as the "greatest mistake ever".

"Android is the standard non-Apple phone platform. That was a natural thing for Microsoft to win," he said.

Steve Ballmer once famously laughed at the iPhone for being expensive and that "it doesn't appeal to business customers because it doesn't have a keyboard."

He later admitted his mistake, saying, "I regret there was a period in the early 2000s when we were so focused on what we had to do around Windows that we weren't able to redeploy talent to the new device called the phone."

"That is [the] thing I regret the most," he said.

The rapid commoditization of the smartphone industry has led to several former industry giants exiting the business. The list includes Nokia, BlackBerry Ltd. BB, HTC, LG, and Motorola, among others.

Apple also has a chokehold on the smartphone industry's profits – the iPhone alone accounted for 85% of the total profit in the June 2023 quarter, according to Counterpoint Research.

The rest of the pie is composed of existing players like Samsung and Xiaomi, among others.

It's not clear yet if Nadella is just reminiscing about the past or has a comeback strategy for Microsoft in the smartphone industry, but it is one of the few companies with the war chest needed to do just that. Will he? Won't he? Only time will tell.

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