There is Hope for Surface Phone Yet, Redstone 3 Update Confirmed for 2017

Surface Phone from Microsoft

Some sources are speculating that Surface Phone from Microsoft is dead in the water because of poor Windows Phone sales during the fourth quarter of 2016. We don’t believe that’s the case. Though it might be further delayed, logical inference shows that Surface Phone could actually come ahead of the holiday season 2017.

First of all, Microsoft will have been tracking Windows Phone sales right through the fourth quarter. That means, when Microsoft CEO Satya Nadella referred to the “ultimate mobile device” in November, he was well aware of the decline in Windows Phone devices, naturally. If that’s the case, then he wouldn’t have said this to Australian Financial Review:

“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. Therefore 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.”

Certain parts of that statement give us valuable clues into what Surface Phone will actually be. The “not as defined by today’s market leaders” obviously refers to Apple and Samsung, meaning Surface Phone will take a different direction. He’s quite possibly referring to the ability of a smartphone to access traditional desktop applications – a key feature expected on Surface Phone.

The “even if they are today very sub-scale” part could refer to the early stages of x86 emulation on ARM architecture, which is the lynchpin for bringing the desktop experience to a mobile device.

Nadella’s reference to “a specific set of customers who need a specific set of capabilities that are differentiated” could indicate the company’s focus on enterprise users. Naturally, that’s a sub-set of consumers, and a much smaller one at that.

All of this makes sense when you think about the stuff we already know about Surface Phone – that it’s likely to come with a 512GB memory option, up to 8GB RAM and possibly a 5.5-inch QHD display. Such specs are meant for running intensive apps, such as VR, 3D, Gaming and so on.

Also in November, Nadella specifically stated this at the annual shareholders meeting:

“If you take Windows Phone, where we are differentiated in Windows phone is it’s manageability, it’s security, it’s continuing capability that is the ability to have a phone that in fact can even act like a PC. So, we are going to double down on those points of differentiation.”

Our take is that Microsoft’s CEO will not be going into such depth describing an upcoming device if it’s not on top of the company’s agenda for 2017.

So, no, we do not believe that Surface Phone will be cancelled. However, the release date could be pushed to the fourth quarter of 2017 considering how critical Redstone 3 will be for Surface Phone.

As of now, we believe Surface Phone could be released around the time that Apple releases iPhone 8 and Google releases Pixel 2 and Pixel XL 2 – ahead of the 2017 holiday season. That’s when the next major update after Creators Update – currently called Redstone 3 – should be dropping. That’s already been confirmed by Microsoft at the recent Ignite conference in Australia.

They could release it right after Windows 10 Creators Update drops at the end of March, but we don’t think Creators Update has enough features to justify the “differentiation” factor that Nadella keeps referring to.

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