Microsoft Counting on Windows Phone 8 to Restore Mobile Market Fortunes

NEWS ANALYSIS: As Microsoft releases Windows Phone 8 Oct. 29 the mobile industry will be watching to see if this will finally spur sales of Windows Phone devices, particularly for beleaguered handset partner Nokia.

The expectations game is going to be restarted Oct. 29 when Microsoft unveils the Windows Phone 8 mobile operating system and handset makers begin sales of devices preinstalled with the mobile operating system.

Windows Phone sales have been weak and they didn’t get much of a bounce when Microsoft partnered with Nokia to make WP its new OS. The thinking is that WP8 will give both companies the sales growth they’ve been waiting for.

The UK-based firm Juniper Research reported Oct. 26 that Nokia sales collapsed by 63 percent in the third quarter of 2012, from the year ago quarter, to just 6.3 million units. Juniper said the likely reason was that people sat on their wallets waiting for WP8 phones to hit the market.

There is reason for customers to do that as WP8 is a substantially upgraded OS from Windows Phone 7, including support for multi-core processors instead of just single core. The improvements are such that Microsoft disappointed many WP7 device owners by saying that they couldn’t upgrade to WP8. The best Microsoft can offer them is WP7.8.

Nokia, meanwhile, just suffered the indignity of being bumped off the list of the top five global smartphone sellers in the third quarter by IDC research, the first time it was missing from the Worldwide Quarterly Mobile Phone Tracker report since its inception in 2004. In China, Nokia was the dominant player as recently as the third quarter of 2011.

Even beleaguered Research in Motion, sales of whose BlackBerry devices dropped by close to 35 percent in the third quarter and whose BlackBerry 10 OS release has been pushed back to March 2013, managed to hold onto third place after first place Samsung and second place Apple and ahead of the Chinese phone maker ZTE and the Taiwanese manufacturer HTC.

But IDC says Nokia is still a company in “transition” from using its Symbian OS to adopting Windows Phone and that rivals have been taking big chunks of market share from Nokia in the interim.

"The company's transition away from Symbian-powered smartphones to ones shipped with Windows Phone has left ample opportunity for rivals to steal share away from Nokia over the past 18 months,” said Kevin Restivo, senior research analyst with IDC's Worldwide Mobile Phone Tracker report that follows the quarterly numbers. But there’s hope.

If it’s any comfort to Nokia, it’s not the only handset maker in “transition,” added Ramon Llamas, research manager with IDC's Mobile Phone team. Besides RIM, Motorola Mobility is in the process of finding its new place in the mobile phone market after Google’s bought the mobile device maker from its parent company, Motorola, in August 2011 for $12.5 billion. The buyout closed on May 22.

Come to think of it, Microsoft’s been in transition in mobile, too. Its Windows Mobile OS was doing well in the early 2000s against Palm and others, but it disappeared from the upper levels of the market share reports due to competition from BlackBerry and later Apple iOS and Android.

As the market watches to see if Windows Phone 8 will be successful enough to lift both Microsoft and Nokia in this competitive space, IDC’s Llamas says this market has still got more moves ahead of it.

“The smartphone market is still relatively nascent, which means there's room for multiple vendors and operating systems to flourish,” Llamas said.

As it is, the total global smartphone market grew by 45.3 percent in the third quarter to nearly 180 million units, according to IDC. So there’s lots of demand to satisfy.