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Microsoft on 'Threshold' of Windows Phone growth

Matt Hamblen | Dec. 5, 2013
The Windows Phone sees some success in U.S., Europe amid continued problems in China

"I expect Windows Phone to gain share slowly, but Microsoft has lots of resources and can subsidize it for a long time if it chooses to do so," Gold said.

Windows Phone still struggles with its past, having only arrived on the smartphone scene three years ago, in October 2010. "Windows Phones came way too late to market with the newest, innovative technologies," noted Patrick Moorhead, an analyst at Moor Insights & Strategy.

"They were late with larger displays, 4G, quad-core processors and higher-end graphics," Moorhead said. "Therefore, Microsoft had to re-target the mid-range market, which hurts their brand strength."

Nokia addressed many of these concerns in recent releases of its smartphones, including the 6-in. display Lumia 1520 running Windows Phone 8, which AT&T put on sale at $100 off, or $99.99 (with a service contract, online only) on Cyber Monday. The sale continued into Tuesday.

It isn't clear how much a phone with high-quality specifications like the 1520 will help sales in the U.S. Windows Phone has done best in the U.S. with lower-end Lumia phones like the 521, according to Kevin Burden, an analyst at Strategy Analytics.

With the 521 and others in its class, Nokia and Windows Phone can slowly build momentum, but that makes it much harder to build Nokia and Microsoft as brands that customers want to buy, Burden said. Having an "aspirational brand ... is still key in making significant market-share gains," Burden said. "This even applies to the Asia Pacific markets."

One important criteria for Windows Phone growth is which target market it seeks. "Microsoft needs to decide whether it still wants to make a premium play or remain a mid-range and value player," Moorhead said.

Windows Phone for the enterprise?
There is also a question of how well Microsoft serves the enterprise market. Once Microsoft moves toward the expected hybrid of the Windows Phone OS with the Windows OS (and possibly Windows RT), it could be easier to sell its smartphones to corporations familiar with the overall Microsoft environment, which includes Office software and custom applications built for Windows-based servers.

"If there's a common set of software across smartphone, tablet and desktop platforms, there's more reason to take Windows into the enterprise, and it's easier for IT managers with less of a development gap," Restivo said.

Microsoft , however, also has to recognize that enterprises with bring-your-own-device policies will make decisions based on what smartphones are hot in the consumer market. "Microsoft absolutely needs to maintain relevance with consumers to drive interest by enterprises," Restivo said.

A cloudy pathway to OS convergence
The future of convergence of the Windows Phone, Windows and Windows RT operating systems seems inevitable, but the timetable is cloudy. The current Windows Phone 8.0 will be upgraded to Windows Phone 8.1 sometime next spring, according to various reports.


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