Microsoft Windows Phone Is Dead, Long Live The Surface Phone

There was a moment, perhaps back in 2015, when the Microsoft Windows 10 Mobile operating system playing off Lumina phones seemed like a viable competitor to Apple iOS and Google Android based phones. That moment was fleeting and based on the most recent earnings call from Microsoft, the Windows Phone is no longer something that Microsoft will be investing any time or money in.

Windows Phone revenue declined $730 million from $735 the prior quarter which means that phone revenue was a mere $5 million. That equates to the change you find in-between the couch cushions. It's nothing. Almost doesn't exist in the overall revenue model of the tech giant. It's probably less than Microsoft spends on K-cups for the Keurig machines in the break room.

Microsoft CFO Amy Hood seemed to eulogize the Windows Phone saying there was "no material phone revenue this quarter," then adding that there would be "negligible revenue from Phone" in the coming months. This was cemented in the official 10Q SEC filing from Microsoft, leaving out a mention of the Windows Phone in the third quarter investment section. Sorry dad, there was still no mention of a new Zune.

Also see: Microsoft's Surface Laptop And Windows 10 S Invite Apple And Google To Thunderdome

More troubling than the inevitable and expected death of the Windows Phone is a bleak outlook for the Surface product division. While revenue for the company was up overall, satiating investors, the personal computing business appears to be taking a few lumps. Mixed in with the ambivalent news about the Phone, Hood reported that the Surface business "declined 26 percent and 25 percent in constant currency, as heightened price competition and product end-of-life-cycle dynamics resulted in lower than expected Surface Pro unit volumes."

Unlike the phone, Microsoft plans on continuing to support and push the Surface into the marketplace -- for now. The rate of decline is expected to be much more moderate than that of the Phone, but that's because people are still using tablets and not Windows Phones. The Surface could stand to benefit from a bit of a price break though, as more and more tablets are hitting the market at a much lower price point. While most of them can't compete features-wise, times are tough and some will have to go without that fancy pen.

There are signs the Surface Pro is on its way out. As ExtremeTech points out, the Surface Pro 4 is 18 months old, the Surface book only got a GPU bump in its latest model. Both lack USB-C, Thunderbolt 3, up-to-date Nvidia GPUs and Intel's 7th generation Kaby Lake processors. So either Microsoft is gearing up for a huge Surface reveal or something else is in the works because I don't see Microsoft just walking away from the personal computing business.

Which brings us to the Surface Phone rumors. Recently a patent surfaced from Microsoft that appears to show a fold-able mobile device. From there you can draw your own conclusions. Is it the beginnings of a Surface Phone or similarly formed communications device? I have another theory.

Later this year Microsoft is set to release the Xbox Scorpio or Project Scorpio or whatever the thing is called. It resembles a gaming PC more than a gaming console when you look at the specs. So perhaps Microsoft is sinking its hardware dollars into Scorpio rather than the Surface product line and every subsequent tablet or computing device will somehow be tied in with Project Scorpio? That patent could just as well be for a portable gaming device, rather than a traditional PC or certainly a phone.

Whatever that patent is for and no matter how far the Surface Phone rumors go this year, it seems that Microsoft learned its lesson with trying to bust into the phone market. There is no unseating Android or Apple iOS in mobile operating systems. We'll see a Surface Phone the day we'll see an iPhone with headphone jack.