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Why Microsoft won't pull the plug on Windows 10 Mobile

Windows 10 Mobile does not have much of a future. With two very disappointing quarters for Lumia sales, a market share of around one per cent, poor vendor support, and no mention of it at Build 2016, this much is clear. You would expect Microsoft to pull the plug any minute now, but the software giant seems to be doing just the opposite.

In an internal email, Terry Myerson is encouraging "certain partners" to continue to pour their resources into the platform. Microsoft's EVP of Windows and Devices Group says that the company is still "committed" to Windows 10 Mobile, claiming that development of its "next generation products" is well underway. It sounds unbelievable, but that is just what you should expect Microsoft to say.

Microsoft does not publicly admit that Windows 10 Mobile is dead because, by doing so, it would jeopardise its efforts on the Windows 10 and Surface fronts. The software giant is too invested in those two products to let the disastrous performance of the Lumia brand get in the way of achieving its goals. (Microsoft wants Windows 10 running on a billion devices in the first two to three years of availability, and the operating system is doing well so far. Eight months in, there were over 270 million installations.)

Windows 10 Mobile is a big piece of the puzzle in Microsoft's strategy regarding Windows 10 and the Surface line. It is one of the biggest reasons why Universal apps exist and why Microsoft is asking developers to focus on them and not plain old Windows programs. Without Windows 10 Mobile in the picture, developers could make so-called "legacy apps" and keep all of the revenue those generate knowing that they would not lose anything in sales from other form factors.

Microsoft wants Universal apps to maintain its momentum because it does not want to lose a cut of all the revenues that those apps generate. A 30 per cent slice could mean billions in revenue every year, and it does not matter if only a tiny part of that comes from smartphones.

The Surface line, running Windows 10, also stands to benefit from Universal apps. Those devices are essentially very powerful tablets, but they are tablets nonetheless. And that means they need touch-optimised content to lure users with, which Universal apps clearly offer. The same cannot be said about programs, which are designed with keyboard and mouse users in mind.

At the same time, the Surface line seems to be a real money maker for Microsoft. Not many folks may be purchasing these tablets, but the fact that they are very expensive means they generate lots of revenue. That revenue is growing, based on Microsoft's earnings reports, and it will continue to grow as more and more consumers shift their attention to premium "ultramobiles".

Gartner expects sales of such devices to grow to 92 million units in 2018, from 45 million last year. That is a big market, with huge potential for growth, and Microsoft should clearly want to keep at it. The smartphone market is huge, in contrast, but growth is slowing. We have seen single-digit growth for the first time, and things will only settle down further in the coming quarters.

This year, smartphone sales will reach 1.5 billion units, but Microsoft is unable to claim a big piece of that pie anyway knowing the position that Windows 10 Mobile is in. But if that leads to lots of billions in revenue elsewhere Microsoft would be right to want to keep the platform on life support.