Microsoft reports record smartphone shipments, but mainly cheaper ones

Software giant Microsoft announced Lumia shipments of 10.5 million units in Q4 2014, which it claimed was an all-time high, although it’s not clear if this includes the Nokia era. These gains are being made at the expense of average selling price, however, with gains mostly coming from the cheaper versions.

“Sales for Lumia phones topped 10 million units, growing 30% year over year this quarter with strength in devices such as Lumia 500 and 600 series – our affordable smartphones,” said CEO Satya Nadella. “In this segment of the market the combination of our brand and value standout and we plan to continue to build a beachhead here.”

This is sensible – Microsoft stands little chance of taking on Apple at the premium end and, besides, its last hope of deriving significant licensing revenue from Windows Phone disappeared when it acquired its largest customer. Everyone except Apple struggles to make money from handsets, so the sensible thing to do is to try to build up an installed base of Lumia users that Microsoft can then sell software and services to.

With the announcement that Windows 10 will be offered as a free upgrade to existing Windows users, Microsoft indicated a broader strategic shift away from maximising licensing revenue and towards maximising installed base. Windows 10 is being positioned as a unified OS and will mark the dropping of the Windows Phone brand. Microsoft clearly just wants as many people using it as possible, regardless of the device.

Microsoft Q4 phone earnings

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