Microsoft quietly made a major personnel move this week, according to an exclusive from All Things D, removing Andy Lees from his role as head of the Windows Phone business and replacing him with VP Terry Myerson. Lees will retain his title of division president but will now focus on both Windows Phone and Windows 8. While it’s hard to know what to make of the move, it appears Microsoft may be trying to offer a unified operating system across handsets, tablets and PCs. But a unified OS isn’t a requirement for Microsoft to become a serious competitor to Apple and Google. Redmond needs to focus on several other factors — and fast.
More than a year after its launch, Windows Phone still struggles in the smartphone market. Microsoft’s share of the U.S. smartphone market is dwindling rather than growing, according to recent data from ComScore, and Gartner research indicates Windows Phone saw a worldwide market share of just 1.5 percent in the third quarter of 2011. And while Apple and Google have come to dominate the space, opportunity clearly exists for a third offering: Apple’s market share may be plateauing, according to that same Gartner data, and fragmentation problems and malware threats continue to hound Android. Meanwhile, Research In Motion is watching its share of the worldwide market erode due to the lack of appeal of its aging BlackBerry OS.
There is still reason for hope in Redmond, of course. Windows Phone 7.5 (dubbed Mango) is drawing positive reviews, and tie-up with Nokia should begin to pay dividends in the coming weeks and months. But Apple (with iOS and Mac OS X) has proven that a unified OS isn’t necessary to thrive on multiple platforms: Tight integration is enough, at least for the near future. So those glimpses of hope won’t mean much if Microsoft doesn’t move quickly and aggressively in three key areas:
- LTE handsets. As ZDNet’s Larry Dignan pointed out this week, Windows Phone simply doesn’t support LTE yet, which gives Android a substantial edge, especially among tech-savvy users who are willing to pay more for a faster device. And Verizon Wireless has said unequivocally that it won’t carry a Windows Phone handset that isn’t LTE-enabled. AT&T has begun testing an LTE-enabled Nokia Lumia running Windows Phone, CNET’s Roger Cheng reported this week, but it’s far from clear when such a device might come to market. For Microsoft’s sake — and for Nokia’s — it had better happen soon.
- Better marketing. As Apple continues to demonstrate with its iPhone and iPad, marketing is crucial to selling mobile hardware. But after an initial push to target young users and gamers with Windows Phone — a strategy I still contend was a mistake — Microsoft’s marketing department has gone all but silent, at least in the U.S. The company must commit big money to backing Mango, and rather than target a niche it should create appeal to a wide range of users — especially business users who have grown weary of their BlackBerry devices. Microsoft has vast expertise in the corporate world, of course, and the enterprise market is low-hanging fruit, thanks to RIM’s stumbles. If Microsoft can tout its strength in messaging and security, it could tap that space before RIM has a chance to bring its new operating system to market.
- Better carrier relationships. Nokia’s unwillingness to capitulate to carriers is the stuff of legend, especially here in the U.S. But strong carrier relationships are crucial to moving smartphones, as Verizon Wireless helped prove two years ago when it teamed with Motorola on a big-budget marketing campaign that sold nearly 100 million Droids in a single quarter. (The carrier is once again digging deep to help Motorola push its new Droid Razr.) Network operators have the brand power, the physical distribution and the deep pockets to help any solid device and operating system find an audience, and they are still looking for an alternative to iOS and Android. Microsoft and Nokia would be wise to come to carriers on bended knees, listen to what they have to say and work with them to sell Windows Phone devices.
There is still tremendous opportunity in the smartphone game: Fewer than half of all U.S. users own a smartphone, and the worldwide penetration of smartphones is still less than 10 percent, asymco noted this week. Meanwhile, Synergyst predicts smartphones will account for 45 percent of the overall handset market by 2015. Microsoft can join Google and Apple at the head of the class if it can effectively address the problems that have shackled its year-old operating system. But RIM is gearing up to make a run with its new operating system, recently renamed BlackBerry 10, and Hewlett-Packard hopes to breathe life into webOS by taking it open source. If Microsoft fails to fix its shortcomings, it will lose out on far more than just mobile.