Satya Nadella delivered his first quarterly conference call as Microsoft CEO yesterday, promising faster and greater innovation as the company works to redefine itself as a mobile-first, cloud-first enterprise. Nadella also spent some time explaining Microsoft’s recent move to make its Windows Phone platform available to some OEMs for free.
Microsoft announced at its Build 2014 developer conference earlier this month that Windows Phone software would be available for free on all devices with a screen of nine inches or less. This is a major shift from Microsoft’s usual practices, and one that will undoubtedly lead to a loss of revenues.
But the move is all part of Microsoft’s plan to speed up the growth of its Windows Phone ecosystem. “When it comes to new opportunities, from wearables to Internet of things, we want to be able to participate in all of this with our Windows offering, with our tools around it, and we want to be able to price by category–and that’s effectively what we did,” said Nadella said during the conference call.
Nadella added it “made sense” for the company to make Windows Phone free on devices below nine inches. The company already has monetization mechanisms on the back end of such devices, and each one will be approached as an opportunity.
“We want Windows to be ubiquitous,” he continued. “That doesn’t mean one price, one business model for all of that. And it’s actually a market expansion opportunity.”
This business model brings Microsoft more in line with Google, which gives Android away for free, making money from advertising and those users who pay for subscription services like music streaming and cloud storage.
In his call, Nadella announced a $429 million increase in revenues from Windows Phone over a nine month period ending March 31 this year, compared to the same nine month period from the previous year. Microsoft put this increase down to higher sales of Windows Phone licenses (something it’s about to lose) and rising smartphone patent licensing revenues.
The Wall Street Journal noted that Microsoft’s net income declined by 6.5 percent to $5.66 billion, while its revenues fell by 0.4 percent to $20.4 billion. Even so, this performance was better than analyst expectations.
Looking ahead, Nadella said the company’s focus was on building products that “people love to use”, and that it would focus more intently on usage statistics for its devices and services in order to gauge how customers respond to its offerings.
Finally, Microsoft confirmed it will close its acquisition of Nokia on Friday, but said it wouldn’t be providing guidance for that business just yet. CFO Amy Hood said this was because Microsoft doesn’t yet have enough information about Nokia’s business to give a clear prediction.