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Summary:

With competition from a resurgent Research in Motion’s Blackberry Platform, Apple’s iPhone and most importantly, the Google Phone platform, Microsoft’s mobile platform is facing its toughest test yet. Here is why.

Recently it was revealed that the newest version of Microsoft’s mobile operating system, Windows Mobile 7.0, would be delayed until as late as 2010. The updated version, which the company’s partners had reportedly been hoping to have by early 2009, was aimed at giving Microsoft a bigger presence on the mobile stage. But delay or no delay, I don’t think it would have been enough. With competition from a resurgent BlackBerry platform from Research in Motion, Apple’s iPhone and most importantly, the Google Phone platform (I will analyze Nokia’s Symbian platform in a separate post at a later date), Microsoft’s mobile platform is facing its toughest environment yet.

I’m not saying that Windows Mobile is no longer relevant. What I am saying is that Microsoft’s grand mobile ambitions might have to come down a few notches. Just like open-source server software made it impossible for Microsoft to extend its stranglehold to servers and the back-end infrastructure business, these newer mobile platforms will act as speed barriers to Microsoft’s mobile ambitions.

Research firm Gartner recently released smartphone market share data for the second quarter, and some of the numbers were pretty astonishing. RIM’s market share surged 126 percent over the second quarter of 2007, to 17.4 percent. For the same year-over-year period, Apple’s OS X platform rocketed higher by 230.6 percent to encompass 2.8 7.3 percent of the worldwide market. Symbian was flat, and Windows Mobile market edged up a mere 20.6 share to stand at 11.5 percent for the period.

Notably, this was before Blackberry figured out its game and announced a slew of devices, among them its new flip phone, aimed at higher-end consumers. A bunch of others, like the Bold and the Storm, will soon be released in the U.S. as well. And Apple continues to wow with its iPhone. But none of those present the most immediate threat to Microsoft’s mobile platform — that comes from Google’s Android.

Over the weekend, rumors began surfacing that T-Mobile USA had pre-sold nearly 1.5 million units of the Google Phone, the G-1, made by handset maker HTC. After seeing the phone up close and personal, I’m not at all surprised.

A few weeks ago, I moderated a panel in Boston that included Rich Miner, group manager of mobile platforms at Google and one of the co-founders of Android, a startup that Google acquired in 2005. Android, of course, has become the underpinning of Google’s assault on the mobile industry.

Miner, who was a keynote speaker at our Mobilize conference, let me play around with his Google Phone. Since I wasn’t able to attend the launch event in New York, it was my first interaction with the device whose existence and emergence over the past few years we have closely followed.

It didn’t take long for me to conclude that the device was well designed, sturdy, fast, easy to use and very intuitive — many of the same sentiments already expressed by experts such as Walt Mossberg of The Wall Street Journal and über gadget blogs Engadget and Gizmodo. (Of course, we share similar concerns as well.)

What I don’t believe is that the device will have a major impact on Apple’s iPhone. The two have a lot in common the way a Mercedes and a Toyota truck have a lot in common: While they contain some of the same basic features — in this case a touch screen, an application framework that draws inspiration from their web peers and a near-identical Webkit browser — the user experience on the two devices is markedly different. In other words, the companies are going after different market segments.

Google’s Android, in my opinion, is a direct competitor to Windows Mobile. Put another way, it’s Windows Mobile done right. I say this because I have tried dozens of Windows Mobile-based phones and their user interface always leaves me feeling like someone with multiple cuts being submerged in salt water. Don’t get me wrong – I think Windows Mobile as an OS has come a long way since its early, awkward roots. It’s just that the new guys are better. A lot better.

In fact Miner, when he used to work at French-owned mobile carrier Orange, was one of the people who helped introduce a customized version of a Windows Mobile-based HTC device there. The experience with Windows Mobile left him so frustrated that he convinced Andy Rubin to team up and build the Android OS.

Sometime later this month, the G-1 will go on sale and people (at least those in the U.S.) will be able to experience the difference between a Windows Mobile- and an Android-based phone for themselves. Of course, some will find the shortcomings of the Google Phone — and according to Mossberg, there are many — grating. Others, like me, will be suitably impressed. And if they’re impressed enough, most handset makers will want to join the party.

So is Windows Mobile a lost cause? Absolutely not: Microsoft still sells millions of devices based on this platform, has brand-name mobile phone makers as partners and, most importantly, the ability to spend seemingly endlessly. They could start by buying browser maker Cellfire Skyfire to make up for Internet Explorer Mobile. And they could hammer home the advantages of Mobile, like how easy it to run VoIP and other applications such as Skype, or how it can work seamlessly with Microsoft Exchange. That will at least keep them on par with their upstart competitors.

  1. Microsoft would have served themselves a lot better by delaying Vista and concentrating a lot more resources on Windows Mobile — both products would likely have been better for it. I get the impression that WM is still the red-headed stepchild within Microsoft. I probably doesn’t help that the customers championing improvements to the desktop OS are Dell, HP, and Acer, while the main WM customer is HTC . . .

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  2. The chart and your 3rd paragraph don’t match. It looks like Apple’s share is 2.8, not 7.3.

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  3. The G1 is simply the geek phone for programmers to plug away on to create the applications for the masses so that future Android phones will be more user friendly and engaging for a larger consumer crowd.

    ,Michael Martin
    http://www.googleandblog.com/

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  4. What happened to the “Give Microsoft 3 versions to get it right” rule of thumb?
    I’m really amazed sometimes. They are spending $7 Billion on research a year, what are they doing? I contacted Steve Ballmer a while back, 2 days later I was in contact with a Microsoft lawyer. So not only do they have incredible internal research resources they also have access to outside research. Ok, in my case it was, “You want me to sign what!”. Maybe that’s it, to many lawyers.

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  5. Despite your door and gloom, I suspect you will find that Q3 numbers will look a lot better than Q2. Q3 saw the release of a number of amazing Windows Mobile phones, like the HTC Touch Diamond, which is selling quite well.

    You intentionally omit discussing Symbian, but Windows Mobile gained market share while Symbian lost it. Does this mean Windows Mobile 6.1 is a better OS than Symbian, or does the sales numbers not actually tell you anything about the quality of the software?

    Also its often written that Windows Mobile is losing marketshare to the iPhone, but in fact the numbers do not support that.

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  6. I agree that Android is the biggest threat to MS however most (assuming) WinMo users are corporate users that probably DON’T LIKE CHANGE when it comes to a device they’re required to lug around due to their job, even if it is for a better user experience.

    Granted more tech savvy people will try something new but I doubt that the average middle to upper level management will willingly seek out a new device that they have to learn.

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  7. In bigger trouble is J2ME. currently you write mobile apps in
    a) J2ME b)windows or iphone

    it will probably be android , windows and iphone in the future

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  8. The 1.5 million figure for G1 is a travesty of tech reporting. It was essentially made up in one Motley Fool article, and then endlessly parroted by the tech sites. Please, please, please take 5 minutes to really look into it. Contact the author of the original source story for that, and please help me get beyond the tech echo chamber.

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  9. @Michael Martin

    I think you might want to wait and then make a conclusion. I was of the same school of thought as that and believe me, i changed my mind.

    @Mark thanks for pointing out that error. i fixed it. sorry buddy for such an obvious mistake.

    @Marin we still think of the 1.5 million # as rumors and have asked T-mobile who are not commenting. Sorry but we are trying hard to get to the bottom of that story… be assured.

    @Dominik, I agree and that is a strong user base but when comparison is with better environments people are going to listen. of course, what happens will be seen in the future.

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  10. Google and Apple not going after the same segment? Is Apple going after prosumer aesthetes, leaving Google the prosumer/ugly-forward segment?

    Michael Martin seems right that Google looks at the G1 mainly as a development mule, but I doubt that poor T-Mobile launched a phone for 2,500 people spread over California, Texas and Washington. Include Amazon’s MP3 service as the exemplary in-box app just for geeks? Don’t think so.

    No, Google and Apple are going after most of the same people, just with two different approaches, two interpretations of the same thing, one from an engineer, the other from an architect.

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