Microsoft's Mobile Comeback Is Looking Terrible

Microsoft ruled the PC market for decades with utter dominance. But today, as the future shifts toward mobile devices, things are not looking good for Microsoft. It's not that it's not trying: Microsoft is spending a lot of money and effort on cracking the mobile market, now in lockstep with Nokia, its top partner. But there's no indication yet that it's having any real success.

Losing Users

One troubling sign: Even now, more than a year after Microsoft started shipping Windows Phone 7 devices, U.S. mobile customers are getting rid of Microsoft devices faster than they're buying new ones.

In the three months ending in February, Microsoft's share of U.S. smartphone subscribers was 3.9%, according to comScore. That's down from 5.2% last November and 7.7% last February.

Longer term, Microsoft's share has been in a freefall: comScore had it at 18% at the end of 2009, and 36% in late 2007, the year Apple introduced the iPhone. (See chart above.) Since then, Apple and Google have gobbled up the lion's share of the smartphone market, with more than 80% of U.S. smartphones in comScore's latest stats.

The trouble is that Microsoft's phones - though decent - just aren't good enough to demand attention. They're certainly better now than they used to be - especially the new Lumia series from Nokia - but that isn't enough. To cause any real damage to Apple or Google, Microsoft's phones would have to be dramatically better than the competition, and they just aren't.

When Steve Jobs described the iPhone as "a leapfrog product that is WAY smarter than any mobile device has ever been," he wasn't just bragging. The iPhone completely changed the mobile industry in one day. Microsoft and its partners just aren't changing anything or making anyone nervous.

How To Win

There are two ways to succeed in today's smartphone market. You can either make a truly amazing product that wows consumers and gets them to seek it out by name - the iPhone way.

Or you can become the next-best thing: Something that the mobile carriers can tweak to their liking and shove in peoples' faces, and sell phones that way.

Operators still control a huge part of smartphone distribution, and that's how many (most?) Android devices have been sold: as alternatives to people who either can't or won't buy an iPhone, based on their carrier choice or other logic. Recall that Android didn't really take off in the U.S. until Verizon needed to produce the Droid series as its iPhone alternative.

Microsoft hasn't done either of these. The new Nokia Lumia 900 is nice enough, but no one's lining up en masse to ditch their iPhone for it. And you don't hear anything from AT&T or any other carrier about Windows Phones becoming their best-selling devices, either.

Sure, operators like Verizon Wireless may say they want Windows to succeed as an alternative to Apple and Google - of course they'd like to see today's platform leaders, their suppliers, less powerful. But carriers don't seem to be doing anything to make that happen.

There just isn't a real reason for people to buy Windows phones instead of iPhones, or even Android phones - features, design, price, services, anything. And until there is, the Windows phone platform isn't going to do well.

The Long Haul

The good news is that Microsoft has two things - money and patience - that could help it eventually succeed in mobile. (And mobile is too important to the future of technology for Microsoft to sit it out.) Windows wasn't a huge overnight hit, and it took the Xbox a long time to make any real money. Bing still isn't taking anything away from Google in the search industry. Recall that before the iPhone came along, Symbian and Palm were considered smartphone leaders. Now they're both gone. Things can change rapidly in this world.

In theory, the launch of Windows 8 later this year, and Microsoft's continued success with the Xbox, could be seen as possible inflection points for Windows phone. There should be some benefits to having a computer/console and mobile device running the same platform - Apple has exploited these, to an extent, with the Mac and iOS devices, and maybe Microsoft will, too, eventually.

But it will, again, have to be so amazing that people and/or carriers will really take notice and consciously switch their allegiance. And the odds of that happening, based on Microsoft's track record in mobile, are slim. If, in a year, we're still looking at mid-single-digit market share stats for Windows Phone, Microsoft will have to do something more dramatic and/or expensive to matter in mobile. And even then, it might be too late or might not work.

But for now, this comeback is not looking great.

Also: The End of RIM As We Know It