Microsofts "Mobile-First" Strategy Comes Into Focus

By Markets Fool.com

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Source: Microsoft

When Microsoft CEO Satya Nadella took the reins from outgoing executive Steve Ballmer in early 2014, his new philosophy was best reflected by a change in the company's description. Before he left, Ballmer referred to Microsoft as a "devices and services" company, presumably to emphasize the company's in-process acquisition of Nokia's phone business and its investments in the Surface tablet line.

When it came time to classify the company he was newly in charge of, Nadella offered a recharacterization, proffering Microsoft as a "mobile-first, cloud-first" company. Investors have responded to Nadella's leadership with the stock registering 30% gains during his tenure versus 20% for the greater S&P 500, mostly on the basis of Nadella's cloud-based performance, which has registered seven consecutive quarters of triple-digit growth, and now boasts an annualized run rate of $6.3 billion.

On the mobile front, progress has been less clear. While Nadella's recharacterization de-emphasized the actual devices themselves, they are still prominent. The Surface tablet is heavily advertised, and there are continuing questions regarding further monetization of the company's $7.2 billion Nokia handset business. But it seems like Nadella's mobile strategy is finally crystallizing, and it's bigger than devices.

Android and Windows are getting cozier
Earlier this year, large smartphone vendor Samsung surprised the greater technology community when it announced that the newest iterations of its luxury Galaxy S6 line would come with Windows-based apps Skype, OneDrive, and OneNote preinstalled, as the two companies reached a joint agreement. And although some carriers have opted not to comply, leaving them as optional downloads, it still signifies an attempt on the behalf of Microsoft to use software in its efforts to become a "mobile-first" company.

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This week, it appears Microsoft is expanding on this strategy. On the official Microsoft blog, the company outlines strategic cross-platform partnerships with 20 named companies to preinstall its apps on Android-based tablets. And that's in addition to the 11 hardware partners that the company signed up for cross-platform partnerships in March. In the "if you can't beat 'em, join 'em'" school of thought, Microsoft is looking to both compete with Android's OS with its Windows Phone and Surface tablet line, and also to monetize its software through Android devices.

The relationship with Apple is tougher, but potentially more lucrative
There's a reason why Apple's not included in the aforementioned press releases -- the company doesn't have third-party apps preinstalled. But that doesn't mean Microsoft isn't attempting to maximize the relationship.

Last year, the company transitioned its Word, Excel, and PowerPoint apps to a freemium model on Apple's App Store, giving basic editing functions for free while requiring its subscription-based Office 365 for advanced functions. In return, Apple has bestowed those three apps with its "Essentials" rating.And that's important for Microsoft.

While Android commands more market share, according to data from Good Technology, Apple dominates in the enterprise set that would be a natural fit for Microsoft's suite of apps. Even Siri's getting some competition, as Microsoft recently released its digital assistant, Cortana, on iOS and Android.

The sum of Microsoft's moves shows a commitment to mobile growth, regardless of its device performance. It may not be the eye-popping growth that the cloud is attaining, but Nadella is focused on his "mobile-first" strategy, as well.

The article Microsofts "Mobile-First" Strategy Comes Into Focus originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.