Why is Windows Phone failing?
Granted, Microsoft always acknowledged that its latest smartphone platform would face a hard road to widespread adoption. But executives in Redmond probably had their fingers crossed that Windows Phone's market behavior would resemble that of its Bing search engine: slow but steady incremental gains, paired with largely positive press.
Windows Phone seems to have received largely positive press, but the platform's so far failed to revive Microsoft's fortunes in the smartphone space. During a July 11 keynote speech at the company's Worldwide Partner Conference, CEO Steve Ballmer described the newish platform's market share as "very small."
Research firm comScore is estimating Microsoft's smartphone market share declined from 7.5 percent to 5.8 percent for the three-month period ending in June. That included both Windows Phone and the company's more antiquated Windows Mobile platform, which is being phased out.
Meanwhile, the Seattle Post-Intelligencer estimated Microsoft's possible revenue from Windows Phone at less than $613 million. That figure came from subtracting Xbox 360-related revenue-some $8.103 billion-from that of its overall Entertainment and Devices Division, leaving $613 million split between Windows Phone and a variety of much smaller projects such as Zune and Surface.
Microsoft's hope is that its upcoming "Mango" update, due to final release sometime this fall, will spur greater consumer adoption. Samsung, HTC, LG Electronics and Nokia have all committed to building new Windows Phone devices preloaded with Mango, along with Acer and ZTE. Some 500 new elements to the update include expanded functionality for the Xbox Live and Office hubs, new multitasking abilities, and Bing deeply baked into the user interface.
But it's questionable whether those improvements will greatly boost Windows Phone's "stickiness" in the marketplace, especially considering how Mango-loaded phones will likely hit just as one of Microsoft's largest competitors, Apple, releases the newest iPhone loaded with the next-generation iOS operating system. Various Android manufacturers also continue to produce increasingly advanced smartphones. In fact there's considerable risk that Microsoft will arrive at its "Mango" plateau just as its rivals jump ahead to an entirely new level-leaving Redmond, yet again, in the position having to play catch-up.
Microsoft is also pinning its hopes on a partnership with Nokia that will see the Finnish phone-maker adopt Windows Phone as its mobile software platform. Following the announcement of that partnership earlier this year, a few analysts suggested that Nokia's global presence would boost Windows Phone to new market heights within the next few years. Research firm IDC, for example, even went so far as to predict that Windows Phone would overcome both Apple's iOS and Research In Motion's BlackBerry franchise to become the second-ranked smartphone platform after Google Android.
Ever since the deal's announcement, though, Nokia has bled smartphone market share at a startling rate. This is attributable to a number of factors, including general abandonment of Nokia's soon-to-be-mothballed Symbian OS, coupled with rising pressure from the flood of cheap Android smartphones into the market. In any case, Microsoft and its new partner face a considerable challenge in retaining Nokia's previously-enviable market-share.
No matter its presence, Nokia is unlikely to help Microsoft much in the U.S. smartphone market, where it retains a negligible presence.
That leaves Microsoft betting that the Mango update, combined with a massive ad campaign and new manufacturing partners, will help change its trend-line among U.S. users. (The company better hope that the Mango update proceeds more smoothly than its previous software updates, which encountered delays and reports of stalled devices.) It could happen, at least in theory, but right now the numbers aren't working in its favor.