Windows Phone 7 Prep, Tablet Talk Dominated Microsoft Week

Windows Phone 7 will launch Oct. 11. The ramp-up to that event, along with Microsoft CEO Steve Ballmer's talk of Windows tablets, dominated Microsoft's week.

Windows Phone 7 is launching Oct. 11, and with it Microsoft's hopes to reclaim some ground in a smartphone arena dominated by the likes of the Apple iPhone and Google Android.

So much of the chatter surrounding Microsoft this week has to deal with the company's prospects with its new mobile platform. Will it succeed? Will it be a crushing failure that dooms all of Redmond's efforts in the space?

Microsoft's big smartphone bet centers on Windows Phone 7's user interface, which aggregates Web content and applications into subject-specific "Hubs" such as "Games" and "People." On a visual level, that certainly offsets the platforms from its competitors, which generally present the user with grid-like pages of individual apps. Microsoft's initial marketing campaign will focus on Windows Phone 7's supposed ability to streamline user's digital lives, at least that's what we observed in some video ads that were briefly leaked online. By the time this article was posted, the videos had been taken down; instead, this was posted on the screen: "This video is no longer available due to a copyright claim by Microsoft Corp."

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Given that Microsoft could spend as much as $400 million on this marketing effort-according to Deutsche Bank analyst Jonathan Goldberg's estimates-it's likely you'll start seeing these ads everywhere, and sooner rather than later. Just not yet, apparently, and not on "Microsoft Watch." <<>>

Microsoft has seen its mobile market-share decline steadily over the past several quarters in the face of fierce competition from the Apple iPhone, Google Android, and RIM's BlackBerry franchise. The company's previous smartphone release, Windows Mobile 6.5, failed to halt that slide. But will Windows Phone 7 allow Microsoft to regain traction?

It depends on who you ask. Research firm Gartner predicts that Microsoft's share of the smartphone market will drop from 4.7 percent in 2010 to 3.9 percent by 2014, following a brief uptick in 2011. By contrast, IDC sees Microsoft's mobile share growing from 6.8 percent to 9.8 percent over that same period.

"IDC believes the market will comfortably support up to five OS players over the next five years," Kevin Restivo, an analyst with IDC's Worldwide Quarterly Mobile Phone Tracker, wrote in a Sept. 7 statement. "Shorter replacement cycles and an ample feature-phone to smartphone upgrade opportunity means the smartphone OS market will remain fragmented but healthy for the foreseeable future."

Microsoft CEO Steve Ballmer recently found himself being paid only half of his potential bonus for fiscal 2010, in part due to what the company's Board called the "loss of market share in the company's mobile phone business" under his watch.

As Windows Phone 7 heads towards release, Microsoft begins to play a delicate game of negotiation and aggression with other tech companies in the space. Despite Microsoft's recent filing of an intellectual-property lawsuit against Motorola, alleging that the manufacturer's Google Android smartphones violate nine of its patents, the two companies made comments this week about their commitment to working together.

"I am open to finding ways to work with Microsoft," Motorola co-CEO Sanjay Jha reportedly told The Wall Street Journal Oct. 6. "But it has to be a compelling offering." On the topic of Microsoft's lawsuit, he reportedly added: "I would much rather have done without that lawsuit, but it doesn't always work out that way."

For his part, Ballmer reportedly told a European press conference Oct. 6 that "we are always [excited] to collaborate with anybody who wants to collaborate with us." Over the past few months, Microsoft has become more aggressive about its technology as it relates to Android-powered smartphones; if the company can leverage manufacturers into paying it royalties on those devices-as it did with HTC-then it stands to make money no matter how well Android or Windows Phone 7 sell over the next few months.

Microsoft could also be in talks with Adobe about initiatives in the mobile space. According to an Oct. 7 report in The New York Times, Ballmer and Adobe CEO Shantanu Narayen met at Adobe's headquarters to discuss the best way to combat Apple. Adobe found itself under fire earlier this year, when Apple CEO Steve Jobs made very public his dislike of Flash, which is banned from that company's mobile devices.

In the wake of Jobs' comments, Apple competitors such as Samsung immediately began touting their own mobile devices' Flash support as a key differentiator. Flash powers rich content on many popular Websites. According to the Times, Microsoft and Adobe executives also talked about the possibility of a merger, which would conceivably result in tighter integration between the two companies' offerings.

Microsoft's mobile efforts are also focused on tablets. On Oct. 5, Ballmer reportedly told an audience at the London School of Economics that his company would have an iPad competitor on the market by the end of 2010. "You'll see new slates with Windows on them. You'll see them this Christmas," he said, according to Reuters. "Certainly we have done work around the tablet as both a productivity device and a consumption device."

That echoes earlier comments from Ballmer about Windows tablets hitting the market around the end-year holidays. However, Microsoft has remained tight-lipped about potential device manufacturers, despite video leaking a few weeks ago of a supposed Hewlett-Packard/Windows 7 tablet in action.

For the moment, though, Microsoft's energies are focused largely on smartphones. "The job right now is we've got to get back seriously into the game of phones," Ballmer also said during his London School of Economics visit. "We've got to have a comeback against the competition, and I think with our new Windows phones we really have a beautiful product."