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Digitimes is reporting that Microsoft is decreasing orders for budget tier smartphones due to poorer than expected sales in select emerging markets and a new, more conservative view of the budget tier smartphone market in 2015.
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Citing an unnamed source, Digitimes states that sales of Microsoft’s budget tier smartphones have been weak in markets such as India, South America, and Southeast Asia, and that consequently Microsoft is reducing their orders “by as much as 20% a month throughout the rest of 2015 to adjust to the market.”
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The unnamed report goes on to state that manufacturers in Microsoft’s supply chain are forecasting that budget tier smartphone sales in emerging markets “will most likely be on a par or drop compared with 2014 due to stagnant demand” and “increased competition in the China market from vendors such as Xiaomi, ZTE, Huawei and Coolpad.”
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WinBeta did note that Windows Phone revenue saw year over year declines in both the second and third quarter of Fiscal Year 2015, as reported in this site’s coverage of Microsoft’s two most recent earning reports. Microsoft stated the decline in Q3 was due primarily to a higher mix of low royalty devices and the drop in Q2 was due “primarily to prior year recognition of approximately $650 million from the Nokia commercial agreement which terminated upon the completion of the acquisition in Q4 FY14.”
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However, the decline in revenue was not due to decreasing sales in Lumia smartphones. In fact, while revenue went down for the both of the most recent quarters, the second quarter report noted that Microsoft saw 10.5 million Lumia units sold in the affordable market and that the third quarter saw an 18% increase in Lumia smartphones sales compared to the previous year.
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The Digitimes report concludes that while Microsoft is decreasing production of budget tier Lumia smartphones, they are “still pushing forth cooperation with various China-based vendors for its Windows 10 platform, however, in order to maintain a stable presence in the smartphone market.”
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