Three hurdles for Microsoft’s mobile future

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.

Question of the week

How can Microsoft ensure the success of Windows Phone?
Relevant Analyst
Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

Do you want to speak with Colin Gibbs about this topic?

Learn More
You must be logged in to post a comment.

52 Comments Subscribers to comment

  1. A unified operating system manifests itself in at least two ways. The first is what end users see – common user experience and the same applications running on device & desktop. The second is the unified code base that the engineering team within the company invests in which allows for common innovation to appear everywhere more consistently, trickle down innovation (desktop to device) to happen more quickly, and device specific innovation to happen with much smaller teams. Apple’s R&D spend is (round numbers) $1B vs Microsoft’s $6B. MSFT is in many more businesses than Apple but even so, their Windows NT R&D spend alone is estimated to be $1B. Apple achieves these R&D economies via a shared OS code base even though the end user experience is customized to different hardware (device vs desktop) and usage scenarios. Much is written about this by Apple, in their conferences, and is even in Job’s bio on the competitive effort by the iPod OS team and Mac OS team to develop the iPhone OS. Apple’s OS X long had multi-core support and great graphics – designed over years – that iOS inherited, by virtue of a common base, to give iPhone & iPad their magical appeal and great performance.

    Microsoft’s Windows Phone code base pre-dates Windows 95. It has slowly evolved to include 32 bit support, separate address spaces, memory protection and security in a very ad hoc fashion. ^^^Windows Phone is still missing lots of features – security, robustness, device driver/sensor model, multi-core/multi-thread CPUs, graphical richness, and user experience components – that are available in the Windows NT code base. The specter of an “OS reset” will hover over Microsoft as devices (phones, tablets) increasingly grow beyond PC-like tasks.^^^

    Share
    1. Wow, thanks much for the thoughtful comments, David. Do you think a lack of a unified OS will impact Windows Phone’s chances of success next year, then, or is it something MSFT can take a little while with?

      Share
  2. Mac/ iOS is basically unix based,and for a good reason… Provides the robustness that can differentiate from hackware. MSFT is yet to experience stability issues… Currently they are marginal with WP7 so there are hardly any users complaining… Will certainly be a problem when more and more handset makers and developers sign up. They mitigate the issue by keeping many APIs closed and only gradually opening them via .NET

    Share
  3. Oh and for the original question… MSFT market wp7 as a non enterpise segment product. They say it is for “life accelerator” end users… IMHO this creates a perception that the platform is not to be taken seriously.. IOS is on the enterprise big time,many companies give away iPads to execs, security and all being thus manageable ir at least perceived to be so.
    ^^^If MSFt wants o score with WP7 they need to penetrate to the ex-blackberry segment too,with secured email an skype as enterprise solution… Best done via private cloud hosted infrastructure so enterprises can take end-to-end responsibility fo their investments into communiation technology^^^

    Share
    1. I completely agree that Microsoft should be targeting business users and the enterprise much more aggressively, bicsek. That’s low-hanging fruit considering A) the market penetration of Windows in the corporate world and B) RIM’s ever-loosening grip on that mobile segment. Apple is beginning to win that market by default, so any competing platform will need to step up quickly.

      Share

Latest Research

Latest Webinars

Want to conduct your own Webinar?
Learn More

Learn about our services or Contact us: Email / 800-906-8098