Windows Phone Flop
by Mark W. Hibben
Ignominious Defeat in the Mobile Internet Wars
That Windows Phone 7 has been a flop in the smart phone market place should have been an obvious conclusion for the Tech Media to make, but they have steadfastly and rather obtusely refused to acknowledge the obvious. Even for me, such monumental failure has been a little difficult to grasp. I really thought Microsoft would at least put up a fight, but it hasn't even been close. It's a shame too, since there's much to like in WP7 and much to like about having an alternative to Android and iOS. For this first Tech Chat of 2011, I'll examine the causes of Microsoft's failure as well as put forth a strategy to reverse their mobile fortunes.
Clearly, WP7 has been introduced very late in the game, but this doesn’t normally hurt Microsoft the way it has in this case. Microsoft usually plays catch up, choosing to imitate rather than innovate, as it did with Windows. And the early versions of Windows (pre-NT) were really pathetic and deserved of the contempt that Mac zealots heap upon “Wind-blows” to this day.
Nevertheless, Windows captured a dominant position in desktop operating systems it has never relinquished. Why is the situation different with WP7? With Windows, Microsoft already had a ready-made market of loyal DOS users it could entice into “upgrading” to Windows. No such large installed base of Windows Mobile systems exists any longer, as the graph below shows.
In 2010, the worldwide market share of Windows Mobile shrank to less than 5 %. Furthermore, no convenient upgrade path exists for Windows Mobile users to upgrade to WP7, other than to buy a new phone. If a customer has to purchase an entirely new platform anyway, that customer is free to re-think the choice of platform.
Four years have elapsed since the first iPhone was introduced. In contrast, less than two years elapsed between the introduction of the first Mac in January 1984 and the first version of Windows, released in November 1985. The failure of imagination with which Microsoft management greeted the first iPhone has been profound. In hindsight, it's obvious that Microsoft didn't have four years to come up with a competitive Mobile OS. It appears that it took them about two years to even figure out that they needed to.
The big draw of the Windows world has always been choice. The huge panoply of hardware and software has usually compensated for less reliability and convenience. Often, especially in technical and engineering fields, Windows has been the only option, since a particular software app might only be available for Windows.
What's the choice available to consumers for WP7? Well, there are a total of five different handsets available. But even here, the level of choice is more apparent than real. The phones are only offered for GSM networks, so no Verizon option is available. All of the phones use the same 1 GHz Qualcomm Snapdragon QSD 8250 processor based on ARM V7 and purporting to give Cortex-A8 level performance. Built on a 65 nm process, they're old news. Even the iPad's A4 processor tested out to be faster than the Snapdragon in tests back in April 2010 comparing the iPad to the Google Nexus One (equipped with the QSD8250). So Microsoft is promoting a line of phones that are already obsolete, especially compared with devices soon to be available running ARM-based dual core Cortex-A9 processors such as the nVidia Tegra 2.
The range of choice in software is also underwhelming. Two months after introduction, the platform is able to offer about 5000 apps, compared to 300,000 iPhone apps and 200,000 Android apps. While building 5000 apps in two months may be an accomplishment in its own right, I doubt consumers are impressed. Consumers necessarily make buying choices based on immediate self-interest. Apparently, that self-interest hasn't motivated many consumers to buy WP7 phones. Since introduction, WP7 phone manufacturers have sold to retailers about 1.5 million phones, according to Microsoft, but there's no information yet on how many phones have actually been sold to consumers.
Even if one assumes that all have been sold, which I seriously doubt, this hardly suggests significant pent-up demand. The iPhone 4 sold 1.7 million phones in just its first three days, and has sold about 31 million phones in 2010. Average daily sales for WP7 work out to about 25,000/day vs. 300,000/day for Android claimed by Google and 166,000/day for iPhone claimed by Apple. As I said, it hasn't really been close.
Herr Spin Doktor
Microsoft fans should nevertheless rest assured that WP7 sales are off to “a promising start” according to Microsoft’s new VP for Mobile Communications Business and Marketing, Achim Berg. Mr. Berg gave an interview recently to none other than the Microsoft News Center in which he offered reassurance that Microsoft was in Mobile for the long haul. Mr. Berg only recently came to his current position in April 2010. Before that he had been general manager of Microsoft Germany and area VP of Microsoft International. Before joining MS in February 2007 he was a board member of Deutsche Telekom responsible for sales and marketing.
I find it significant that someone from outside the US was brought in to fill this position. It suggests to me that no one in the Redmond inner circle wanted the job. This action neither inspires nor conveys confidence in Microsoft's current course of action in the mobile arena. Is Achim Berg meant to be a fall guy? I hope not. There is a better use for him.
What Microsoft desperately needs to save its Mobile OS effort is a large reservoir of mobile phone users willing to upgrade to WP7, or a partner who could deliver said reservoir. Nokia possesses in the form of its large customer base a reservoir of WP7 upgrade candidates, and Nokia desperately needs a credible Mobile operating system. Given that the new CEO of Nokia is Stephen Elop, an ex-Microsoft executive, a partnership is not unthinkable, but it would be difficult. Here, Mr. Berg could play a role as intermediary, being a European familiar with the mobile phone business in Europe. There would have to be much swallowing of pride on both sides. Nokia has invested heavily in its own Symbian OS, and in supposed follow-ons such as Meego. The institutional reluctance to let go of Symbian must be enormous. On Microsoft's part, just acknowledging that it needs the partnership will be difficult enough, but the price will undoubtedly be higher. Nokia would want exclusivity, and Microsoft doesn't do exclusivity. This is hardly a marriage made in heaven. Will the marriage actually come about? I think the odds are no better than 50-50. Neither party is accustomed to the co-dependence such a marriage would entail.