Kinect Sales, Google GSA Contract, WP7 Rumors Marked Microsoft Week

Xbox Kinect has sold 2.5 million units, a bright spot in Microsoft's week otherwise marked by looming conflict with Google over government cloud contracts.

High sales of the Xbox Kinect boded well for Microsoft's holiday retail season, but the company nonetheless faced difficulties this week on a number of fronts.

Some 2.5 million Kinect hands-free controllers have sold in the device's first 25 days of release, according to Microsoft. "We are on pace to reach our forecast of 5 million units sold to consumers this holiday," Don Mattrick, Microsoft's president of Interactive Entertainment Business, wrote in a Nov. 29 statement posted on Microsoft's corporate Website.

With Kinect, Microsoft hopes to appeal to the same casual gamers who previously gravitated towards the Nintendo Wii. The latter console recently fell to third place in the market, after years of outpacing the Xbox and Sony PlayStation franchises, although recent sales figures suggest it remains competitive.

Kinect utilizes a 3D camera to translate a player's movements onto a digital avatar. As the controller continues its sales run, there are indications that Microsoft is seeking to leverage that same 3D technology to other devices and applications. The company has already acquired Canesta, a maker of 3D-image sensor chips and camera modules that can be embedded in products such as vehicle dashboards.

During a Dec. 1 meeting in New York City, Microsoft executives told eWEEK that Microsoft is continuing its push into natural user interfaces, including the integration of touch, gesture and voice-activated technology into a range of products.

Spoken commands will represent a substantial part of that evolution. Already, users can speak to Kinect in order to manipulate their game character or pause a movie; some 20 percent of Bing Mobile searches are conducted via voice.

"Speech is a common key ingredient in NUI [natural user interface,]" said Ilya Bukshteyn, senior director of Microsoft Tellme, while suggesting that it would be "two to three years" before voice becomes a more ubiquitous factor in both the consumer and enterprise space.

If Microsoft was pushing merrily forward with Kinect and hands-free interfaces, though, it could have a harder road with Windows Phone 7.

"Not all the stars are aligning for [Windows Phone 7] the way it did for [Google] Android," Ross Rubin, the NPD Group's executive director for industry analysis, wrote in a Nov. 30 posting on the research firm's corporate blog. "First, whereas Verizon had a paucity of touch screen smartphones prior to the Droid, AT&T and T-Mobile are flush with them." Both carriers have a proven track record with their top-shelf devices, particularly the iPhone.

"On the other hand, the devices at those carriers offer clear alternatives to the incumbents," Rubin added. "All of the Windows phones at AT&T pack something the iPhone lacks, and the HD7's screen looms large above others in T-Mobile's portfolio."

Rumors suggest that a huge Windows Phone 7 software update is in the works for sometime in the next few weeks. Chris Walsh, a Windows Phone 7 developer and co-creator of the ChevronWP7 unlocker app, tweeted Nov. 28: "I've been heading the first #wp7 update is going to be massive."

Microsoft executives have publicly stated that the update in early January will include cut-and-paste, a previously missing feature, but other tweaks remain largely under wraps.

Meanwhile, Microsoft and its carrier partners have declined to release any hard sales-numbers for Windows Phone 7. An early November report from suggested that some 40,000 devices had sold Nov. 8, the platform's first day of U.S. release on AT&T and T-Mobile. More recently, a Nov. 29 corporate blog posting from U.K. retailer MobilesPlease suggested Google Android and Symbian devices were still outselling Windows Phone 7 in that country.

"Windows Phone 7 has [gotten] off to a sluggish start as far as our customers are concerned," read the blog posting, "accounting for just 3 [percent] of smartphone sales and a little under 2 [percent] of overall sales through and our network of mobile phone partner sites."

One retailer's report, of course, isn't necessarily indicative of an overall trend. However, Microsoft very much needs Windows Phone 7 to succeed if it wants to reverse several quarters of smartphone market-share declines.

Microsoft also faces increased competition from Google in the cloud-services realm. Google's new contract to provide Gmail and Google Apps to the General Services Administration is a significant event in the search-engine giant's push to bring its products into the corporate and governmental sphere.

Microsoft reacted strongly to news of Google's contract victory. "There's no doubt that businesses are talking to Google, and hearing their pitch," Tom Rizzo, senior director of Microsoft Online Services, wrote in a Dec. 1 posting on the Why Microsoft blog, "but despite all the talk, Google can't avoid the fact that [oftentimes] they cannot meet the basic requirements."

Rizzo went on to accuse Google's enterprise offerings of "inadequate product support, failure to provide a roadmap, poor interoperability with other [lines] of business applications and limited functionalities."

Microsoft and Google have been competing fiercely to distribute their cloud-based software to as many local governments and corporations as possible. In yet another stage of its "all in" cloud strategy, Microsoft recently unveiled Office 365, which combines Microsoft Office, SharePoint Online, Exchange Online and Lync Online into a unified cloud platform.

In November, Google sued the federal government, alleging that the Department of the Interior unfairly restricted its bid to update its e-mail and messaging system. Microsoft's BPOS-Federal suite eventually won that contract, estimated at $59 million over a five-year life cycle.

Both that case, along with this newest twist with the GSA, suggest that Google and Microsoft will be firing their cloud-based broadsides at one another for some time.