Microsoft’s Windows Mobile 7 Could Be A Success

Microsoft timed the announcement of its next big hope for mobile, the Windows Phone 7 Series, to make a splash at the Mobile World Congress. However, it will likely take more than a year – given that those devices are scheduled to debut in time for holiday 2010 – before their impact on the market, and Microsoft’s declining mobile market share is fully known. In the meantime, a number of analysts have already begun to comment on Windows Phone 7 and its potential effect on the market.

Windows Phone 7 Series will integrate both Xbox Live and Zune software, and feature “hubs” that aggregate content from a number of areas viewed as pertinent to the user’s life. For example, the “People” hub will merge together data from Outlook, Windows Live and other social networking services; in total, hubs will include “People,” “Pictures,” “Office,” “Music & Video,” and “Games.”

“The upcoming Windows Phone 7 is a bold bet – it is an entirely new version of Windows and is a clean break from the Windows Mobile line,” Katherine Egbert, an analyst with Jefferies & Co., wrote in a 16 February research note. “The prototype has received favorable reviews from Engadget and Gizmodo, et.al., but only time will tell if WP7 will win with consumers.”

Egbert noted that Microsoft seems geared for a seismic change in its approach to the mobile arena, and perhaps benefit from what it saw as a decline in share for Apple’s iPhone franchise.

“Microsoft is comparing its efforts with WP7 to the transition from DOS to Windows in the 1980’s,” she wrote. “They believe that hardware developers and application providers are likely to coalesce their efforts around a few standard OS platforms. They also expected the leading integrated device manufacturer, Apple, to lose share over time, like in the early 1980’s, as horizontalisation propels choice, lower prices, and improved functionality.”

However, a recent report from comScore indicates that Apple expanded its reach into the mobile arena between September and December 2009, gaining 1.2 points for an estimated 25.3 percent market share, while Google climbed 2.7 points to reach 5.2 percent. By contrast, Microsoft saw its share decline by exactly 1 point, from 19 percent to 18 percent, during that same period. Research In Motion also experienced a 1-point decline, from 42.6 to 41.6 percent.

Other analysts agree that, despite this mobile re-launch, Microsoft faces an uphill battle in a competitive space.

“We think that it is too early to make a call whether Windows Phone 7 will help Microsoft to stabilise/gain market share in the smartphone market, but it is an impressive good start,” Sandeep Aggarwal, an analyst with Collins Stewart, wrote in a 16 February research note. “It is important for Microsoft to stay highly competitive in mobile market because – 1) mobile devices have been used by both Apple and Google to wedge the core PC market… and 2) mobile Internet is an extremely large emerging opportunity.”

Aggarwal sees smartphone operating systems with “pre-installed mobile products including mobile search” as the key to growing this mobile Internet business.

Still other analysts feel that the radical departure of Windows Phone 7 from previous editions in Microsoft’s mobile line could have a negative impact on its adoption within the enterprise.

“The change will not endear Microsoft to its existing base of corporate users who will have to redesign and redeploy their apps if they are to utilise this new platform,” Jack Gold, an analyst with J. Gold Associates, wrote in a 15 February research note. “We don’t think Microsoft can count on many enterprises making such a transition/upgrade, and most organisations will likely stay with older WinMo versions (especially those using ruggedised devices, e.g., Symbol, or those with apps that can’t be easily transported.”

Gold added: “Traditional WinMo corporate device suppliers (e.g., HP, HTC) will likely find other platforms/OSes attractive, and enterprise users should start evaluating end of life strategies for existing WinMo devices. We expect WP7 to be more attractive to SMB users than to larger corporations – a substantial market which Microsoft would do well to capture.”

Microsoft plans to continue to invest in Windows Mobile 6.5, according to CEO Steve Ballmer, who mentioned during a 15 February press conference at the show in Barcelona that the previous mobile operating system will be supported even as the Windows Phone 7 Series rolls out.

Hardware partners for that rollout will include Qualcomm for the optimisation of hardware and software, and OEMs ranging from Hewlett-Packard and HTC to Sony Ericsson and Samsung. Operator partners will include T-Mobile, Sprint, AT&T and Verizon, although Microsoft indicated during the press conference that AT&T will be considered a “premier partner.” Microsoft intends for a deeper degree of hardware homogenisation between the devices.