Microsoft is not giving up on its Windows phone. Far from it. The software giant has ambitions to build the “ultimate mobile device.”

CEO Satya Nadella, the man widely credited with turning around Microsoft after a bruising period under Steve Ballmer, is addressing the mobile phone after early attention to the company’s cloud computing business and the Surface hybrid tablet.


“We will continue to be in the phone market not as defined by today’s market leaders, but by what it is that we can uniquely do in what is the most ultimate mobile device,” he told the Australian Financial Review in an interview.

Of course, nobody really knows exactly what the mobile of the future might be, or indeed what the ultimate mobile device might do.

“We don’t want to be driven by just envy of what others have, the question is, what can we bring? That’s where I look at any device form factor or any technology, even AI,” he added.

The Indian-born Nadella is widely expected to parlay the relative success of the Surface hybrid tablet – which has won favorable comparisons with the like of the MacBook Pro – on to a mobile phone.

Microsoft’s slipping mobile sales

Microsoft remains a marginal player in the mobile phone, dominated by Apple’s iOS and Google’s Android operating systems. It has taken additional hits this year. For the first time, the market share of its Windows phone dropped below 1%, from 2.5% in the first quarter of 2015. According to Gartner, Microsoft’s share slipped to 0.7 percent but that’s still nearly 10 million phones.

Under Ballmer, Microsoft made its biggest play yet in the mobile phone market by buying Nokia’s handset business for $7.6 billion. But that gamble failed. Last year, Nadella wrote off that investment.

With Nokia assets, “we stopped doing things that were me-too and started doing things, even if they are today very sub-scale, to be very focused on a specific set of customers who need a specific set of capabilities that are differentiated and that we can do a good job of,” he told Australian Financial Review during a visit to Sydney for a developers conference.

Nadella reiterated Microsoft’s commitment to innovate.

“I mean, take even Surface. Three years ago, the two-in-one as a form factor was questioned. Does anybody need one? And now guess what, even our competition has decided that it’s not a refrigerator and a toaster but it’s actually a two-in-one.”

Nadella, who took the helm of Microsoft in early 2014, has won the confidence of technologists and investors. He was recently featured on the cover of Fortune magazine as the man who is “transforming Microsoft.”

Under his leadership, the Microsoft stock has hit an all-time high, bettering a 1999 record of $59.96 per share. That surge came after the company in October reported upbeat first-quarter results including a more-than-doubling of its cloud business. Since then, the company has released the new upgraded Surface Book, which has beaten the new MacBook Pro notably in gaming.