Microsoft is restructuring, with massive layoffs afoot, mostly from its newly acquired Nokia subsidiary. The impact will be massive for the feature phone market and big opportunities for other manufacturers to fill the gap.
Microsoft’s new CEO, Satya Nadella, announced a restructuring of the company last week as part of his ‘refocusing’ Microsoft on what he says is the company’s core – productivity software. Part of the move will see Microsoft killing off Nokia’s Symbian feature phone range along with its budget smartphone products – the Nokia Asha a nd X r a nges. Whether or not this is the right move for Microsoft is debatable, but it will certainly create a crevice in emerging markets where feature phones are king.
There are estimated t o be a r ound 5 bn mobile phones in the world today, of which only 1bn are smartphones. The r e s t are feature phones that still account for 65% of the market in Africa where their popularity has nothing to do with operating systems.
Feature phones are easi ly available for less than R100 in South Africa, for one. They have batteries that last for up to three weeks. They can be bought almost anywhere and are treated as disposable. They won’t be going away any time soon. If Microsoft and Nokia won’t be selling them, then someone else will.
Don’t let the small price tag fool you eit her. Manufacturers make decent margins on feature phones. The wildly popular Nokia 105, for example, earns the company about the same margin as its higher-end Lumia devices. The Asha range has also been increasingly successful i n markets such as Kenya a nd I ndia where Nokia continues to sell more feature phones than any other manufacturer. Asha offers things like dual-SIM f unct i ona l i t y a nd smartphone-like apps on a platform that is affordable and meets some of the criteria, mentioned above, that make feature phones popular.
Nadella’s move away f rom this segment is a bold one and has been greeted positively by investors. It is high time to make tough calls to refocus the business, and an intervention is long overdue. It does mean saying goodbye to a massive segment of the mobile market, however, where Nokia is still a leader. Whoever tackles the void will be richly rewarded.