[sc:mobile-category ]Last week Microsoft made a big announcement with impact to Windows Phone/Mobile, which was followed quickly by the doomsayers that Microsoft was getting out of the phone business completely.

This is of course preposterous as Microsoft’s Mobile/Cloud first strategy doesn’t really go anywhere in the long term without Windows on phones.

But it is a significant announcement which highlights where they want to be with phones in the future, in an e-mail to employee’s, Satya Nadella, made it clear they wanted to focus on three area’s with Windows Mobile where they can make “unique contributions”:

1. We’ll bring business customers the best management, security and productivity experiences they need;
2. value phone buyers the communications services they want;
3. and Windows fans the flagship devices they’ll love

This makes sense as previously they were all over the map:

1. Feature phones.
2. 500 line of budget phones.
3. 600 line of budget phones.
4. 1300 line of budget phones.
5. 700 line of mid-range phones.
6. 800 line of mid-range phones.
7. 900 line of flagship phones.
8. 1000 line of flagship phones.
9. 1500 line of flagship phones.

That’s nine lines of phones, even Samsung doesn’t spread itself that thin.

So what does it mean in reality?  Obviously feature phones are dead, Microsoft doesn’t want to be in that business and no one else does either.

I can see them cutting back to three phone lines:

1. 600 line for budget, they’ve just released the 640/XL to good reviews.
2. 800 line for business, businesses look to have good hardware at a reasonable price.  They don’t want flagship phones (except for the c-suite’s of course), they want something they can buy in bulk and works well enough.
3. 900/1000 line for the flagship phones.  I’m including the 1000 line here as the rumors are a 1020 replacement is on the way and this is certainly one area they can make “unique contributions” as there’s nothing else like the 1020.

This will let them focus on the areas that make sense and let the partners have a chance to compete with them.

Of course one of the other rumors that sprung up after the announcements was that the Lumia brand was going to be replaced with the Surface brand, but that seems unlikely.

The Lumia brand has a lot of recognition around the world, where as Surface is more concentrated in 1st world countries.  Microsoft won’t want to dilute the Surface brand (which is known as a premium brand) with low end devices like the 600.

But they could do a co-branding exercise, something like dropping the numbers and rename:

• the 600 line to “Microsoft Lumia”
• the 800 line to “Microsoft Surface Lumia”
• the 900/1000 line to “Microsoft Surface Lumia Pro”

But that goes a little wordy honestly and doesn’t really add value.

Microsoft will be in the phone business for a long time, Windows 10 Mobile is coming soon and will be a huge step forward.

Microsoft can’t afford NOT to be in the phone business, period.