The Microsoft Q2 earnings beat expectations, but there is one thing that is still a big problem: Windows Phone.
Microsoft announced $25.7 billion in revenue and $6.3 billion in profit thanks to a strong cloud business. The only big negative is the Windows Phone. Only 4.5 million Lumia phones sold in the Holiday quarter. The revenue of the Windows Phone business plunged 49% year-over-year.
Now the Tech blogs declare Windows Phone dead including The Verge and Techcrunch. It certainly seems the case since the numbers look very bad. A 57% drop in the number of sold devices looks very, very bad. There are though reasons why the sales declined in that magnitude.
Windows Phone 8 devices have not sold well and even less consumers wanted one in the wake of the Windows 10 release. The Lumia 950 and 950 XL Windows 10 phones just started to go on sale in early December and only on AT&T. This only gave Microsoft about three weeks of Lumia 950 and 950 XL sales.
I give Microsoft at least one more year to get the Windows Phone on a growth path. The company has managed to grow the Surface revenue by almost 30% year over year. This proofs that Microsoft can sell hardware. Selling phones is more tricky as it also involves carriers. On top of that iOS and Android are extremely dominant in the smartphone market.
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Microsoft has to get "HoloLens creative" to lure customers away from Android and iOS. The Lumia 950 and 950 XL are a good start offering 20MP camera, 5.7-inch Quad-HD screen, Face based unlock and Windows Continuum.