Microsoft's Mobile Future Riding On Windows Mobile 6.5

When Microsoft releases the newest version of its mobile operating system, Windows Mobile 6.5, on Oct. 6, it will have more riding on the success of that launch than most other companies' mobile updates.

Microsoft has seen its share of the mobile operating-system market decline, reaching 9 percent in the second quarter of 2009, according to a research note by Gartner. Strong competition from established players such as Apple, Palm and Research In Motion threatens to drive that down even further. Microsoft CEO Steve Ballmer, during the Venture Capital Summit on Sept. 24, allegedly said that his company had "screwed up" Windows Mobile, according to a few investors present for the meeting.

Nonetheless, Microsoft has spent the summer trying to create a steady drumbeat for the release of Mobile 6.5, in the process raising the stakes for its success. If Microsoft's mobile market share upticks a few points over the next few months, that will create some breathing room for the company in advance of its next rollout, Mobile 7, whose functionality is being kept under wraps, but which will reportedly provide more robust competition to the iPhone and the Palm Pre. If Windows Mobile's market share continues to decline, though, Microsoft could be faced with some harder strategy questions.

During the Venture Capital Summit, Ballmer also reportedly said that he wished Mobile 7 had already been launched. That update is scheduled to launch in the fourth quarter of 2010.

In the meantime, Mobile 6.5 will launch on a variety of smartphones by Oct. 6, including ones manufactured by HTC and Sony Ericsson, two more HTC devices offered by AT&T, and three by LG Electronics.

Given the increasing importance of an application ecosystem, Microsoft has focused much of its attention on ensuring that Mobile 6.5 launches with around 600 apps. Over the summer, the company encouraged developers to create applications for Windows Marketplace, its competitor to Apple's App Store, which recently passed the 2-billion-download mark.

Microsoft has been trying to take advantage of developers' desire to earn higher margins on their creations than they generally get with the App Store, where many of the apps are priced at their 99 cents or free.

"We would definitely want to promote that you make more money selling applications than selling your application in a dollar store," Loke Uei, senior technical product manager for Microsoft's Mobile Developer Experience Team, told mobile application developers in Redmond, Wash. on Aug. 19. "But 99 cents, come on, I think your app is worth more than that."

In a discussion with eWEEK, a Microsoft spokesperson suggested that applications for the Marketplace would generally sell for between $0.99 and $29.99. Its competitors, such as Research In Motion's BlackBerry App World, have set a floor of $2.99 for their paid applications. Mobile 6.5 will provide added functionality over its predecessors in the apps department, with built-in Flash support and widgets capable of being manipulated using a multitouch interface.

According to Microsoft executives, Mobile 6.5 will boast improved touch capabilities, including the ability to tap, pan and flick in order to navigate through screens; it will feature a new version of Internet Explorer Mobile, for desktop-style page rendering on the smartphone; and the ability to back up and sync data.

However, Microsoft is also taking a calculated risk with its market share by porting some of its mobile functionality onto competing mobile operating systems. On Aug. 12, Redmond announced a deal with Nokia that would make a mobile version of Microsoft Office available for Symbian, Nokia's mobile operating system. Representatives from Nokia and Microsoft both declined to discuss with eWEEK how the deal would affect the overall competition between Symbian and Mobile for market share, but analysts consulted at the time felt that it could affect Microsoft's plans in the long-term.  

"I don't think the news necessarily hurts OEMs who have historically produced [Windows Mobile] devices, except that they can now expect stronger competition from Nokia," Chris Schreck, an analyst with IMS Research, told eWEEK in an interview. "If an OEM was wondering what platforms to support five years from now, the argument for continuing to pay royalties to license Windows Mobile just got a little bit weaker."

Microsoft may be hoping that a one-two punch of Mobile 6.5 and Mobile 7-the former for phones on the low- to mid-range of the market, the latter for higher-end devices-could help its market share situation heading into 2011. That would help Redmond take full advantage of the rising number of application downloads, which a report from Juniper Research estimated at reaching nearly 20 billion a year by 2014.