News From Telecom World

Can Microsoft be a mobile hero?

Posted on: October 30, 2008

The smartphone landscape is changing rapidly with the arrival of the T-Mobile G1, the first phone based on Google’s Android software, and the huge success of Apple’s iPhone business. And if both of these take big slices of the smartphone market, that leaves less for everybody else – unless they can find a way to respond.

Research In Motion (RIM) is already in motion: it has spent the past couple of years moving into the consumer market with hot new products such as the BlackBerry Bold and Storm. Nokia, the world’s largest phonemaker, has targeted high-end users with the E71, N95 and N96 and similar phones. Nokia has also taken control of the Symbian smartphone operating system and is making that open source as well. Meanwhile, Microsoft has … done not very much at all.

“We’re very confident in our strategy, so I don’t think we need a particular response,” says Alex Reeve, who heads up the Windows Mobile business in the UK.

But while Microsoft sold 18m smartphone licences in the year to June, 2m short of its target, Apple says it sold 6.9m iPhones during the last quarter alone. As the iPhone goes global, it’s not hard to see it outselling Microsoft’s 50+ handset manufacturers combined. It’s also not hard to see many of those 50+ handset manufacturers at least trying Android as well.

Microsoft is in a tricky position because, like Google, it doesn’t make phones. It supplies an operating system that anyone can license, but ultimately it’s reliant on partners who may have other ideas.

Taiwan’s HTC, for example, has been a major manufacturer of Windows Mobile phones, but now it’s making G1 Googlephones as well.

Windows Mobile can’t even rely on its parent, Microsoft to give it a market advantage. Phones running Windows Mobile were the first to offer good synchronisation with Microsoft Exchange, which is the standard corporate email server, and this gave Windows Mobile an advantage in the business market. However, Microsoft has since licensed Exchange sync to rival handset-makers including Palm, Nokia and Apple.

Locked market

Reeve says: “We’ve taken the approach that we want as many people to have access to Exchange as possible. We have absolute confidence in our ability to sell our mobile product without locking people in.”

Of course, Microsoft still has advantages for corporate use. Ken Dulaney at Gartner, the leading analyst covering handhelds and smartphones, points out that all the systems that were designed for warehouse and factory floor use run Windows Mobile. Also, companies can develop their own applications using Microsoft Visual Studio – which they already use to develop PC applications – and install those applications however they like.

“We’d never lock people in like the iPhone,” says Reeve. “The whole point of a smartphone, in the Microsoft philosophy, is to make it open to applications, so everybody can build the solutions they really want.”

Google’s Android software is open-source (it’s based on Linux) and free, so it could also challenge Microsoft as an open application platform. But Reeve doesn’t think the G1 is a threat. “It has no integration at all with the enterprise,” he says, and Google has a “kill switch” so it can erase software that you load on the device.

According to Dulaney, Microsoft had a choice with Windows Mobile 6: it could either “defend their enterprise turf against RIM”, or focus on improving the user interface and attack the consumer market where the iPhone was making headway. “In either case, they were going to suffer,” says Dulaney.

“I think they chose the right thing, which was to defend the enterprise area, where they’re strong,” he says.

Reeve, however, rejects the idea that Microsoft has been slipping in the consumer market. “We’re growing very quickly in that area,” he says.

He points to the HTC Diamond, HTC Touch HD, Samsung Omnia and the Xperia X1 – Sony Ericsson’s first Windows Mobile phone – as being stylish designs with consumer appeal. A hit product can change everything, at least for a while.

Stylish hardware does not necessarily come with stylish software, of course, and Windows Mobile has come in for plenty of criticism. Dulaney says Microsoft has “different priorities – a passion for developers”, but lacks Apple’s passion for the user interface (UI). “They just don’t have the genes,” he says.

Face to face

The hardware suppliers and network operators can do something about that by changing the UI, as Palm has done, or by adding their own interface, as HTC did with TouchFLO. So far, however, nothing has come close to the iPhone.

Whether Microsoft will be able to do that with Windows Mobile 7 remains to be seen: Reeve says Microsoft isn’t commenting.

But in the long run, the real question is whether Microsoft cares. If Windows Mobile sells 20m licences a year at a hypothetical $7 to $8 (£4.50 to £5) each, that’s only $140m to $160m, which isn’t as much as a decent Xbox 360 game. It’s a very long way from the $4.6bn that Apple reckons the iPhone generated in the last quarter alone.

Still, Microsoft isn’t likely to drop out of the mobile phone market, for two reasons. First, there’s value in the way Windows Mobile fits into Microsoft’s whole enterprise business, supporting Microsoft Office, Exchange and its Live web sites. Second, Windows Mobile isn’t a standalone system, it’s just one example of a software stack based on Windows CE, alongside PocketPC and Windows Automotive. CE has been used in thousands of products including set-top boxes, petrol pumps, jukeboxes and even sewing machines.

Given the scale of the investment in Windows CE, and Microsoft’s ambitions in the consumer electronics area, Microsoft must surely keep it going.

What I think we are likely to see, under the Windows not Walls slogan, is Microsoft moving to a broader “platform play”. Instead of focusing on particular products, Microsoft could present Windows as a more interoperable offering for the 2010s.

The platform will have three legs – Windows 7, Windows Mobile 7 and Windows Live – with Live Mesh rings automatically synchronising data as required across all your devices. (If you want to play with Live Mesh, sign up for the beta.)

Applications such as email, messaging and word processing will be available on all devices, and also online at Windows Live, with the two working together. You can take your pick about which you prefer at any given time, because they’ll interoperate.

In the ring

It sounds like a good plan – but then, so did the Windows CE strategy in the early 1990s. However, even the best plans can fail if the execution isn’t up to scratch, and sometimes things just don’t work out the way anyone might expect.

For example, starting in the late 1990s, Microsoft has spent the thick end of a decade establishing its own mobile platform. It can’t have imagined being overtaken by a late entrant such as Apple’s iPhone. It surely couldn’t have imagined being challenged by a phone from a search engine company, Google, that barely existed at the time.

Bill Gates met similar challenges in 1995 when he made Microsoft do a U-turn on the internet, performed with unexpected agility and speed. Whether Steve Ballmer can do it remains to be seen.

Source: Guardian


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