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Does Microsoft Need A Flagship Lumia Smartphone?

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In all the talk of Windows 10's upcoming arrivalthe demotion of Microsoft's hardware in the recent reorganisationthe focus on cloud computing and clients for iOS and Androidwhat is the future for a new flagship Lumia smartphone coming out of Redmond during 2015?

There has been talk of a Lumia 1030 for many months. A natural follow-up to the Lumia 1020 in terms of numbering, parts have been spotted in the supply chain and by online tech sites in small numbers since early 2014. Is it time for Microsoft, in all the renewed focus, to have its own flagship smartphone hardware?

Both Apple and Google have created hardware to show off what their smartphone software can do. Apple might be taking the commercial approach with the iPhone, but Google's Nexus program is much more about providing a baseline demonstrator for manufacturers and a reference device for developers around the world to use.

I would expect the Nexus' role in demonstrating best practices to be the path chosen by Microsoft. Just as Google's Nexus devices are customer-facing, so Microsoft would still be 'selling' a smartphone, but it wouldn't necessarily have to go all to sell a significant volume of the devices. It could take the best hardware of the day, match it up with the Windows 10 OS, and show its partners and the public an undiluted version of Windows 10 on a mobile device.

The use of a reference design will help engage manufacturers, but there is another benefit. If Microsoft open up the taps and use all the latest hardware it can make a device that will also engage the public interest. The Lumia 1020 might not have sold in huge numbers but the extensive technology used in the camera helped it to stand out. Speccing a high-end Windows 10 smartphone will get the geekerati talking about Microsoft and mobile once more.

That chatter, coupled with marketing around OneDrive and Microsoft's cloud computing vision should be able to create a halo effect around Windows 10 as a whole, benefiting all of Microsoft's software efforts. Of course every user of one of these phones will also be signing up to Microsoft's cloud services.

And then there's the simple matter of pride. Being able to stand up and show a device that showcases the benefits of Windows 10 in the mobile form factor would mean something. While the Lumia 830 was a nice phone when it was launched (and it still is), it wasn't really a flagship handset. It was the second string lieutenant that had no choice but to lead the troops. That it performed so well is testament to the strength of the device and the OS.

But Microsoft can do better.

Next page: What are the issues in going ahead with a flagship strategy?

Any product is designed to sell, but Microsoft's focus should not be restricted to selling this flagship smartphone - Microsoft's current key product is software, not hardware, and products should be geared towards getting people using Microsoft's cloud services.  The advantage of a flagship smartphone with Microsoft's software running is not to rack up enough sales to grab a few percentage points in the market share charts, it's to bring people into the Microsoft family.

Lumia 830 and Wireless Charger (image: Ewan Spence)

Just as the Surface tablets, the Xbox gaming ecosystem, and countless installations of Windows, all act as on-ramps into the cloud, so a Windows 10 flagship mobile would ultimately be a route to an on-ramp. Be it a direct sale, inspiring someone to buy other devices in the Lumia portfolio, or to inspire a manufacturer to work on a device that acts as its own on-ramp, a flagship's job is to generate not income, but inspiration.

Yes, that would mean that the device would be a loss leader. The R&D costs would be high, and without a huge commitment to manufacturing multiple millions the economies of scale on offer to the likes of Samsung or Apple would not be available. There would be a financial hit and the easily measured cost of manufacturing and distribution would have to be balanced against the longer term benefits of brand building and customer acquisition.

What's the alternative, a slow and painfully visible running down of the purchase of Nokia's devices and services division, with the last Lumia devices following the last corporate plan of 'focus on low-cast for market share to the exclusion of all else?' If the decision is to get out of the hardware game completely, then Microsoft should have the courage to do a hard stop, distribute the employees to other projects, and hand the Lumia brand a quick death so everyone can move on.

If that is not the case, then Microsoft should keep the Lumia team busy with something more than another iteration of low- to mid-range handsets. A flagship could energize the team into delivering a handset that pushes current hardware and software to the limit, it could show Microsoft 'gets' mobile in 2015, and it would be a clear illustration of 'cloud first, mobile first' in action.

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