Can a lower-cost Windows Phone carve off a significant portion of the smartphone market?
After months of positioning its smartphone platform as the counterpoint to high-end competitors such as Apple's iPhone and some Google Android devices, Microsoft plans on aiming Windows Phone at a less-pricey market segment.
"We are dramatically broadening the set of price points in Mango-related phones that we can reach," Andy Lees, president of Microsoft's Windows Phone division, told the audience during the Asia D conference Oct. 19. "That's particularly important because going lower down in price point opens up more addressable market."
For months, rumors have circulated about a stripped-down Windows Phone OS code-named "Tango," aimed at lower-cost hardware and developing markets such as India and China. At the moment, though, Microsoft seems more focused on rolling out its wide-ranging "Mango" update, which includes some 500 tweaks and new features. The update will appear on a range of new devices from the likes of Nokia, Samsung, and other manufacturers.
Android already occupies a healthy portion of the smartphone midmarket, and Apple-despite its reputation as a purveyor of costlier mobile devices-is making moves in that segment of its own, selling the 8GB version of the iPhone 4 for $99 and giving away the 8GB iPhone 3GS for free with contract. That could elevate Windows Phone's push into the midmarket a matter of necessity. The bigger question is whether such a push will help the smartphone platform gain traction against Android and iOS, which so far have dominated the market.
Nokia could play a sizable role in Microsoft's midmarket hopes. The Finnish phone maker not only holds a reputation as a manufacturer for hardware in that segment, but-after abandoning its homegrown mobile operating systems in favor of Windows Phone-it needs to make a substantial push in that direction in order to reverse its current market share declines. (Nokia's most recent earnings report detailed net sales of $12.3 billion for the third quarter of 2011, a year-over-year decline of 13 percent, with operating losses of $98.4 million.) A push buttressed by Windows Phone.
"During the third quarter, we continued to take the action necessary to drive the structural changes required for Nokia's long-term success," Nokia CEO Stephen Elop wrote in an Oct. 20 statement accompanying the earnings results. "Additionally, I am encouraged by our progress around the first Nokia experience with Windows Phone."
Other Nokia executives have been much blunter about the company's fortunes riding on Windows Phone. "The reality is if we are not successful with Windows Phone, it doesn't matter what we do," Chris Weber, president of Nokia, told AllThingsD in an August interview.
In addition, Microsoft is almost certainly encouraging other manufacturing partners to think more about the midmarket. Considering the moves by Google and Apple, it doesn't really have a choice.