Microsoft Phone Market Share Shows Need for WP7 Hit

Microsoft saw its smartphone market share continue to decline in US during the three months ending December 2010, placing further pressure on its new Windows Phone 7 to succeed.

According to research firm comScore, Microsoft’s share dropped from 9.9 percent in September, to 8.4 percent in December. Research In Motion’s share also dropped by 5.7 percent during that period, to 31.6 percent of the market, while Palm’s stake tumbled 0.5 percent, to 3.7 percent. Apple enjoyed a slight uptick of 0.7 percent, to 25 percent of the market, and Google Android continued its rapid adoption with a quarterly 7.3 percent gain, to 28.7 percent.

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Microsoft’s previous smartphone franchise, Windows Mobile, continues to maintain a presence in the enterprise, where it backstops a number of legacy applications. For the past year or so, though, Microsoft has made no secret of its intentions to replace the increasingly antiquated and fragmented software with a new platform that could compete on its own terms with Google Android and the Apple iPhone.

Windows Phone 7 consolidates Web content and applications into a series of subject-specific Hubs, such as “People” and “Games”. Microsoft is reportedly pouring hundreds of millions of dollars into the platform’s promotion, but the overall effect of its efforts – at least, as reflected in rising or stagnating market share – probably will not be fully felt for several more quarters. In the meantime, questions remain about Windows Phone 7’s early market impact.

In the three months following Windows Phone 7’s rollout in the US market, Microsoft has released just two sales reports for the platform: In December, the company told journalists some 1.5 million Windows Phone 7 units had been sold by manufacturers to retailers and on January 26, it confirmed with Bloomberg News that the number had risen to two million. How many of these have been sold on to subscribers has not been disclosed.

That number gives no indication of how many units ended up in consumers’ hands. In place of that data, Microsoft executives have habitually pointed to research data suggesting some 93 percent of Windows Phone owners are either “satisfied” or “very satisfied” with their new smartphone.

But an executive from one of Microsoft’s smartphone partners, LG Electronics, told the blog Pocket-lint in a January 14 interview that Windows Phone 7’s launch was “less than we expected.”

James Choi, a marketing strategy and planning team director, said in that posting: “We strongly feel that it has a strong potential even though the first push wasn’t what everyone expected.” He offered no hard sales data, however. LG Electronics is one of the companies building the initial line of Windows Phone 7 devices, along with the likes of Samsung, Dell and HTC.

Microsoft executives have pushed back that Windows Phone 7, while not necessarily a blockbuster right out of the gate, is nonetheless selling at a satisfactory rate.

“Our numbers are similar to the performance of other first-generation mobile platforms,” Achim Berg, Microsoft’s vice president of business and marketing for Windows Phones, mentioned in a Q&A posted December 21 on the company’s corporate Website. “It takes time to educate partners and consumers on what you’re delivering, and drive awareness and interest in your new offering. We’re comfortable with where we are, and we are here for the long run.”

Currently available on GSM-based networks such as AT&T and T-Mobile, Windows Phone 7 will appear on CDMA (Code Division Multiple Access) networks such as Sprint and Verizon sometime in the first half of 2011.