The Motley Fool: Microsoft is too late to the game with Windows Phone 7

Image of a generic Windows Phone 7 smartphone. Shows off the WP7 Metro UI.

Image of a generic Windows Phone 7 smartphone. Shows off the WP7 Metro UI.

Microsoft is investing heavily in its upcoming Windows Phone 7 launch. The software giant is reportedly dumping $500M into marketing and another $500M into OEMs and third-party software developers to give its mobile OS a much needed jump-start. With so much cash flowing into this attempt at mobile greatness, analysts are responding en masse to assess the financial value of this somewhat risky investment.

The latest analyst to join this parade is Eric Bleeker of the Motley Fool, a well-known financial advisory company. Bleeker offered his perspective on Windows Phone 7 and the volatile mobile phone market into which Microsoft is entering. According to Bleeker, the outlook for Windows Phone 7 is grim. He concludes his analysis with the sobering thought:

I hate to sound dismissive of Windows Phone 7 before it even hits stores, but the deck is stacked against it. Regardless of Windows Phone 7’s features, it’s just too late in the game.

In his analysis, Bleeker makes several valid points about Microsoft’s failed mobile strategy. Bleeker reminds us that smartphones have 30% market share and notes that Microsoft is looking at this remaining 70% as a gold mine of customers ready for the plundering. This assumption that all 70% are ripe for the picking is incorrect.

Many people have not adopted a smartphone  for a reason – they are not interested in the higher cost and complexity associated with these devices. Bleeker asserts that there is a large core set of users who will not buy a smartphone, regardless of how much money and effort Microsoft throws at Windows Phone 7. Microsoft missed out on grabbing a piece of the current 30% smartphone market and they can not make it up with this remaining 70%.

Bleeker also points out that Microsoft intends to snag customers from the pool of current iPhone and Android users. This too is a difficult feat as most iPhone (89%) and Android (71%) owners plan to stay with their current platform when they upgrade. Lest we forget, people spend a good amount on time and money on the apps for their selected platform. Most people are reticent to give up that investment and enticing them to start over from scratch with Windows Phone 7 will be difficult, if not impossible.

I could continue but these are the two main arguments Bleeker presents in his grim assessment of Windows Phone 7. If you want to read the full essay, you can find it here. When you have finished reading, come back and let us know your opinions on this analysis. Will Microsoft’s Windows Phone 7 falter as predicted or will it achieve success beyond the analysts’ wildest dreams?

[Via The Motley Fool and msmobiles]

  • sit2k

    Bleeker is not a very smart individual.
    1. microsoft had 27% of the smartphone industry share last year and have since lost 12% and are down to 15%.
    2. microsoft will not only retain that 15%, but will regain their 12% and more due to the fact that xbox gamers will flock to the portable xbox game feature of this device.
    3. microsoft went up against palm and symbian when they first launched windows ce and everyone laughed at them (as they are now). at the time palm/handspring owned 90% of the smartphone industry.. oh but the way, palm laughed at microsofts attempts then also.

    bleeker will come out wrong and look like a fool in his assessment.

    • Lee Jin

      If you use the reputable Gartner industry statistics, Microsoft’s share of the mobile market has plummeted to only 5%. Not only that, it is in freefall, and going lower.

      • sit2k

        yahoo and nielson have reported 12-13%

        it’s in a free fall because they announced a new OS in february and consumers are waiting for the new OS instead of spending on the older OS.. WOW! seriously does someone really have to point that out?

      • sit2k

        uh.. hp bought palm (duh?)
        sony and toshibo were never big on wm..

        by the way, at&t ordered 8 million wp7 devices for launch..

      • sit2k

        i guess nielson, yahoo and many others are not as reputable? give me a break, you just want ms to fail

      • Singaro

        But its also a fact that Microsoft never concentrated on the mobile market that closely since they had focused on PC segment. Last two years they didnt come up anything new in mobile since they had a renewed focus to mobile and WP7 they had built ground up. So there is not point in saying about historical data of last two years.

        I personally had seen demo units of WP7 and feel its superior than others in several aspects and my IMHO I feel it will be a blockbuster device.

        1) I dont think any of the device can stand against WP7 in gaming.
        2) The touch interface is better than any device, its fluent and its lively. Its uniform across applications but still providing room for customization.
        3) Office + Zune comes with it. There are lot many users for these two software.
        4) Mail client is really good , superior than any other platform.
        5) Booting time, App launch time , browser speed all are better than any other platform currently in the market.
        6) Use the bing maps and tell me if you can find something better, I bet, you cant.
        I should also say the things i didnt like much

        1) Picture quality was similar to other platforms, nothing better.
        2) Search facility some times (5% of the time) going wrong.

        Overall I feel its a blockbuster device after the arrival of iPhone. I am not a fan or Techie but a normal user , I dont subscribe to any Tents , and comments are based as a normal user. I personally loved using iPhone used it for two years , Currently an Droid user. I liked using these devices but still WP7 is better.
        I bought iPad, but its a piece of crap and built on hype.

  • qo

    Microsoft can throw all the money it wants at advertising, but it was never in the mobile game and never had the internal innovation engines to play in it. If you want to attend meetings all day long, and hone your political chops, apply for a job at Microsoft. If you want to innovate, you’re better off at Apple or Google (IMHO).

    • sit2k

      apple innovate? really? have you looked at the palm tungsten that came out in 2001? it’s the iphone twin brother.. android is not innovative either because it’s a copy of the iphone.. bunch of icon grids like in the palm devices that hit stores in the 90’s.. lol innovative!

      oh but you can buy a macbook pro for 4 grand with inferior specs compared to my dell studio xps 16 which i got as a refurb for 1 grand.. the specs completely blow away even the latest apple products..

      everything apple does is a copy of ms including their OS which is a copy of windows 95 and up.

      • qo

        sit2k: the specs completely blow away even the latest apple products..

        Oh, I see. You value specs over use experience. Can’t say I agree, but at least I now understand where you’re coming from.

      • qo

        sit2k: the specs completely blow away even the latest apple products..

        Oh, I see. You value specs over use experience. Can’t say I agree, but at least I now understand where you’re coming from.

  • bob

    just another failure in the making like kin…
    except this one’s gonna cost them even more…

    and you really think corporate america wants their
    workers sitting around playing xbox all day?

    even if that does seem to be the primary activity at microsoft’s campus…

    • sit2k

      bob,

      the kin failed because it’s a tween phone and parents were not going to pay the $30 data plan for them.. use your brain, MS stocks have split 9 times, they don’t fail, they regroup

  • CmBaal

    Windows Phone 7 has definitely peaked my interest enough for it likely be my first smartphone purchase. I’m just waiting to see some of the handsets and carrier information. If AT&T is really their primary focus than I’m not going to be thrilled (2GB dl plan? Really? I would burn through that in a week..). I’d much rather wait for whatever HTC handset T-Mobile gets.

  • Morgan3rd

    So… Apple and android are expected to have continuing growth in their devices, (just look at apples P/E ratio), but for some reason that market doesn’t exist for Microsoft?

    Might want to change your outlook on apple and Google then.

    • sit2k

      they predict 50 million iphone sales yearly and never happens. the iphone finally beat MS is mobile sales this year after 3 years

  • jerry

    20 years from now, will anyone own a non-smart phone?
    10 years from now, will anyone own a non-smart phone?
    5 years from now, how many will own a non-smart phone?

    As you point out, the issue is mainly one of cost of the devices, and build out of the networks.

    How is your VHS player doing?

  • Franz

    The advantage of WP7 is it has the ‘it just works’ aspect of iOS, while giving the chioce of hardware as in Android.
    It basically is the ‘right’ platform. why? read on:
    Android is too fragmented, too many hardware types meaning apps won’t work on every device. E.g. games on Android will never look as good compared with iOS because developers have to make the app work for multiple devices (Samsung Galaxy S has probably the best graphics chip on any smartphone at the moment, yet no game on it looks as good as the IP4 due to Androids environment).
    I’ve used Winmo6.5 (HTC Touch HD), Android 2.2 (flashed on my HD) and iOS (iPad), so I know the positives and negatives of each platform. WP7 imo fits in perfectly to what I want, ie what i said above, the ‘it just works’ aspect of iOS, while giving the chioce of hardware as in Android.
    Why don’t a want an iPhone? well, basically same reason as why my mates got an Android handset instead….. they don’t want to look like a sheep, whether or not the iPhone is a great device.

  • winphofan

    I agree with sit2k about bleeker looking like a fool. Windows Mobile was the underdog when it first came out, but eventually had quite a large % of users. Microsoft also came from behind with the xbox and xbox360 but is now extremely successful in the gaming arena. Android came out of nowhere in mobile and and is now very successful and increasing its user base every day. To say someone can’t compete simply because it’s too late is illogical. Everything about the iphone today looks basically the same as it did in 2007, and a lot of android phones UI’s look like a simple rip off of the iphone. Windows phone 7 looks different and works different and very modern. I don’t think most consumers look at a phone for multitasking and copy and paste, besides microsoft already anounced that there will be copy and paste in a future update, and as for multitasking it has the capibility to do so, microsoft just hasnt created the developer tools for the developer community yet. The only negative reviews i’ve read about windows phone 7 have provided little to no facts as to why its bad, simply said no copy and paste or no multitasking and completely left out all the positives.

  • Lee Jin

    ‘The Motley Fool’ is a publication for investors, and Microsoft’s own shareholders see no value in Windows Phone 7 (as can be seen from Microsoft’s low stock price).

    This grim forecast for Microsoft’s Windows Phone 7 gets worse when we consider that Microsoft’s technology partners share the view that Windows Phone 7 will fail. In February 2010, Microsoft announced 8 phone manufacturers and 11 phone network partners.

    These partners included OEMs such as Toshiba, HP and Sony Ericsson. Where have they gone? They have deserted the Windows Phone 7 sinking ship.

    In February, Microsoft announced mobile networks Verizon, Sprint and T-Mobile USA would be Windows Phone 7 partners. Now these networks have also abandoned Windows Phone 7. The situation just gets worse.

    Everyone is now trying to escape the coming Windows Phone 7 train wreck.

    • sit2k

      did winmo fail or did it have a great 10 year run? let me help you, great 10 year run and it would go on longer if hardware manufacturers did not put a great OS on a weak devices.

      go test the htc hd2 and see the WinMo OS fly. If wp7 doesn’t do it for me i will go back to winmo because production is key here not cheap games and apps that steal my personal info

    • sit2k

      a little more education
      wp7 will have bing built in which means for ad money for MS and the MS stocks have split 9 times. stock holders welcome wp7 with open arms..

      if anyone held a MS stock before the splits, that 1 stock is worth over $12,436.48 brainiac..

      hate MS much?

  • Tony Gaspar

    Microsoft has a chance to win back business users. My last Windows Mobile phone was great just getting a little slow. I only bought a Android based phone because I was excited about a Iphone substitute for Verizon. WHAT A DISSAPPOINTMENT ANDROID IS. Droid and Android based phones are terrible business phones. They clearly do not care about contacts or appointments. I call my Android based LG Ally a teenage chick phone. Also, try finding a good calender app for android….ha…good luck. I really hope Microsoft gets it right

  • kilari

    I also think the assumption there is a too late for the game is wrong. If there is 70% of the phone market still using dumbphones and the analyst thinks there is no way to tap into that cus people will never give up their dumbphones he shouldn’t be an analyst or he should stop drinking the Apple koolaid. If Android is signing up 200,000 per day and iphone is signing up 100,000+ per day there is totally a market for new customers who seen a commercial on tv. How do you think Droid took off? Verizon heavily advertising it. Microsoft also has the funds to heavily advertise. If you think Microsoft with a known brand like Windows can’t gain any ground, HP/Palm will be screwed with webOS.

    So i have two phones, a Pre as my personal, and a Cliq XT as my work phone, and had a G1 before that. I’m unwilling to leave webOS behind for WinPho7 but if WinPho7 is as good as it looks in video I’m going to bail from Android to it in April when my Tmo Early Renewal comes up. As tempting as buying a used Vibrant is, I’m waiting for WinPho7. Cus when Microsofts back is against the wall they start kicking ass. Just take a look at Windows 7. Great OS, right when everyone thought they were down.

  • akili

    He might want to be a little more expansive in making predictions.

    Markets for technology, particularly personal devices attached to socialising and multiple uses don’t saturate so easily. The market is still growing, there are still people waiting to make a switch.

    The other thing is the user population is also shifting. Predictions made based on today won’t be applicable in 5 years. A lot of current users may choose to remain with their current OS because they don’t care either way, but the gadget market is always headed by the younger generations, who probably understand technology much better, hence they do care about functionality, and are more open to trying new ideas. If WP7 can pull off a convincingly better alternative, the market is not as static as he makes it sound.

  • butthead2u

    All Microsoft has to do is have an exceptional phone and substidize the cost of the phone to a price point that will gain market share. If a great smart phone comes out at $100, there’s a lot of people that will buy it. $50 even more. Microsoft is a cash machine with $34 billion in the bank. Allowing multiple phone makers to make good phones allows Microsoft to focus on their core compentance (software). They’ve been piecing this together for years and no one has noticed. They’re just now putting all the pieces together. Anyone who thinks they’re down and out should talk to Steve Jobs! I was buying their stock at $18 when everyone had left them for dead. People would laugh when I told them I bought Apple stock! It’s amazing how fast people forget! Keep buying Apple, there’s no way they can fall even though they’re doing the same thing they did the last time Microsoft beat them with Windows. Maybe I’ll buy some more Microsoft now, go ahead and laugh!

  • http://none Jhon

    “Many people have not adopted a smartphone for a reason – they are not interested in the in the higher cost and complexity associated with these devices” –

    LOL… OMG please tell me this guy doesnt consult pepole what to do with their moneys.

    1. What complexity? – everything is complex till you learn how to use it, my parents thought the internet was complex a couple of years ago then they learn how to use it and now you cant get them to leave the mouse.
    I agree that some of the features are not for everybody, but I dont think it got to do with complexity and even so thats where M$ has really nail it, WP7 looks so simple and intuitive to use that every 7yr and 50yr old human could easily master.

    2. What high cost? – smartphones prices today are chip and they keep on getting cheaper as long as there will be a competition.

    Actually I think that in 5 years from now there will be no “dumb” phone manufacturing!

  • johnny d.

    This author is either way too young or too stupid to understand the history of Microsoft and how they eventually come back to dominate a given market. FYI, the smartphone market is still very much in its infancy. With over 4 billion phones in the world and less than 100 million of them being smartphones, I would say that it is still anyone’s market to win. While people love to hate Microsoft for some strange reason, they often overlook the huge investments and great delivery of products as in the case of Windows Phone 7. This phone is great! Just wait and see how well it does! I’ve used it, played with it, kicked the tires, etc., and it blows away Google, and I dare say Apple too.

  • Nikolai

    I think he overstates the 70% case. Certainly some, even many, of those 70% won’t switch, but some of them will. Even if it’s only a third of them over the next five years, that’s many millions of new customers. Add in Blackberry, Symbian, and other users, who have lower satisfaction rates than iPhone and Android, and there really is quite a lot of market left. Obviously WP7 won’t get all of them, but it doesn’t have to. I mean, Android and iPhone currently have what, 40% smartphone share combined? That’s hardly a lock.

    • Russell

      Nicely put, Nicolai!

  • greg newman

    I believe that Microsoft will stay in the smart phone game and will stick with the Present windows phone 7
    user interface because it works and makes their phone different from the rest of the pack. The main things they have to do is to add multitasking and cut and paste and a flash player ap and keep their Tellme voice control ap in the windows phone 7 and heavily advertise it like crazy 0n television and radio and in newspapers, magazines and websites people like to visit . I think the keys to this phones success will be for Microsoft to continue to improve and stick by their windows phone 7 UI and heavily advertise it because if people know the Windows phone 7 exists some people will buy it and spread the word that it is a great smart phone which will cause others to buy the product. If Microsoft is smart what they should do is not give up. it will take a year and a half for this phone to get Public recognition and get it’s new loyal customers

  • qo

    sit2k: the specs completely blow away even the latest apple products..

    Oh, I see. You value specs over user experience. Now I understand where you’re coming from. Don’t agree, but at least understand.

  • qo

    sit2k: the specs completely blow away even the latest apple products..

    Oh, I see. You value specs over user experience. Now I understand where you’re coming from. Don’t agree, but at least understand.

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