Microsoft plans cheaper phones as it pushes mobile

Microsoft, under new chief executive Satya Nadella, will accelerate a push into mobile software, joining forces with hardware manufacturers and Qualcomm to develop cheaper phones for emerging markets.

Microsoft said it's working with Qualcomm on a low-cost phone design that developers and handset makers can use to build their own devices, and added partners including Lenovo Group Ltd. to make Windows smartphones. Nokia, whose mobile- phone business will become part of Microsoft, is set to unveil new lower-priced handsets today.

Trailing Apple and Google in more sophisticated devices, Microsoft is now trying to build market share for its Windows operating system from the bottom up. Cheaper smartphones mean consumers in less-developed countries will have a chance to use the Internet for the first time, a fast-growing market that's also attracting rivals such as Google, maker of the Android operating system.

"Microsoft can be more healthy by widening our ecosystem," Joe Belfiore, a Microsoft vice president, said in an interview at the Mobile World Congress in Barcelona. "We care a ton about emerging markets."

Microsoft and Qualcomm are designing a basic core of a phone with the necessary processors and wireless chips that developers can start with as they design Windows phones for emerging markets. Microsoft also plans to update its Windows 8.1 software and Windows Phone software this spring, helping it target lower-priced devices, Mr Belfiore said.

Microsoft's push to broaden the reach of its mobile ecosystem comes as Mr Nadella takes over from Steve Ballmer and the company prepares to complete the $7.2 billion takeover of Nokia's handset business.

Nokia is planning to announce an expansion into lower-end Android smartphones at the Mobile World Congress, people familiar with the matter said this month. The company has scheduled a press conference for this morning.

“Our new CEO has said mobile first,” Mr Belfiore said. “That plays naturally to our strategy of reaching more people.”

Microsoft’s effort to get more handset makers to offer Windows phones has so far failed to shake the dominance of Apple’s iOS and Google’s Android, which account for 96 per cent of the smartphone market. Of the more than 1 billion smartphones shipped in 2013, only 3.3 per cent ran Windows, according to market-research firm IDC.

Eighty-nine per cent of the Windows phones sold were made by Nokia, said IDC.

Microsoft said yesterday nine manufacturers, including Lenovo, ZTE and LG Electronics, plan to add Windows Phone devices to their offering. Samsung, HTC and Huawei. also make Windows phones.

This is only the latest attempt by Microsoft to spread Windows to more corners of the world. Last year, operating systems chief Terry Myerson floated the idea of free or low-cost Windows software to smartphone makers like HTC, people with knowledge of the matter said at the time.

The last revolution in mobile communications happened when the smartphone was born more than a decade ago, and the explosion of cheaper internet-enabled handsets for developing markets will be the next milestone, said Yves Maitre, head of devices at Orange SA, the French wireless carrier which has expanded into markets such as Egypt, Poland and Kenya.

At Mobile World Congress, other companies are also announcing lower-end devices. Mozilla, developer of the Firefox browser, unveiled a $25 phone prototype.

“The story of internet-for-everyone will be written at MWC this year,” Maitre said.

Nokia has used Windows in higher-end smartphones since 2011, while relying on its own software in cheaper phones aimed at emerging markets. The company has lost share in the low end as Android smartphones costing $100 or less have gained users.

When asked about Nokia’s plan to add Android devices, Mr Belfiore said there are things with Nokia that Microsoft is excited about and things it isn’t. He declined to comment further.

Microsoft isn’t planning to build a long-term strategy around Android devices, a person familiar with the matter said this month. Rather it may be planning to use the Nokia Android phones to bolster its sales in the lower end until it can produce Windows phones for that market segment, the person said.

Microsoft agreed to buy Espoo, Finland-based Nokia’s handset business in September. The companies have said they expect to complete the deal this quarter. (Reuters)