May 5

Written by:
5/5/2009 8:21 AM 

Microsoft, Micro-Share 

Industry observers agree that a mobile device is the computing platform of the future. Currently, about 12 percent of mobile phones sold worldwide are smartphones, but the percentage is expected to increase to 20 percent by 2012. Just as Microsoft and Apple battled for control of the market for PC operating systems during the 1980s, Microsoft, Apple and others are now battling for control of the market for mobile operating systems. 

Although Microsoft’s Windows operating system software is used on over 90 percent of personal computers, its mobile phone operating system is in a three-way battle for the number two position. Symbian, Nokia’s operating system is the market share leader with 52.4 percent, and Research in Motion (BlackBerry smartphone) is in second with 16.5 percent. Microsoft’s 13.9 percent share of global mobile operating systems places it just ahead of Apple’s iPhone software with a 9.6 percent share. Market share of the current key players are shown in the chart below.

In addition to the established operating systems included in the chart, a significant new competitor is poised to enter the market in a big way. Several mobile phone manufacturers are expected to introduce models using Google’s Android mobile operating system in the next few days and weeks. 

There is also the issue of momentum. While Microsoft has seen its share inch up from 11 percent in 2007 to 12.3 percent in 2008, according to IDC, Apple has tripled its market share from 3 percent in 2007 to 9 percent in 2008. 

For years, Microsoft has charged almost zero licensing fees per handset, hoping to make the money back by selling applications they create directly to consumers. That model differs sharply from Symbian, the market leader, which is an OS developer and marketer but produces no applications. In an aggressive move to get back in the game, Microsoft announced on Monday February 16, 2009 that LG Electronics agreed to use their new mobile operating system on 50 of its smartphone models. LG had previously used the software, called Windows Mobile, on only one handset model. 

The announcement of a deal with LG was the latest in a series of moves designed to strengthen the Windows brand in the smartphone segment of the mobile market. Microsoft’s recent strategic moves have included: 

• announcing the opening of an application store called Windows Marketplace for Windows, selling 20,000 applications, many of them for mobile devices.
• introducing the latest version of its mobile software, Windows Mobile 6.5, which the company said corrected many unwieldy features of its predecessor, and has a touch-enabled screen, (but not the multitouch feature of Apple’s iPhone).
• announcing plans to provide Windows Mobile users with a free service that backs up personal information like data, contact lists and photos onto Microsoft servers. Consumers can replace the information if a phone is lost or stolen or if they decide to use another cellphone.
• including a button with Microsoft’s corporate flag on all mobile phones that use Windows Mobile to direct users to a menu of functions and services. 

Manufacturers using the Windows mobile operating system have also agreed to display the Windows Mobile operating system logo prominently on their handset packaging and in advertising promotions. 

In the market for Internet search, dominated by Google, one percent market share (about $100 million in annualized revenue) has been calculated to have a value of $1 billion in market capitalization. While the mobile market is not that large in revenue terms, valuation multiples may be similar. That explains why Microsoft may be waking up after a long slumber.