Should Microsoft be worried about Windows Phone’s falling market share?

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Research firm IDC released its quarterly smartphone sales data on Thursday, estimating that Android and iOS phones combined for 96.4 percent of the phones shipped last quarter. That leaves just a meager 3.3 percent of the market for Microsoft’s Windows Phones as well as handsets that run BlackBerry or some other software. Windows Phone is the clear third horse in this race but even so, it’s market share declined by nearly 10 percent in the past year.

Nokia Lumia 930

That’s a bit concerning since the smartphone market as a whole continues to grow. Unfortunately for [company]Microsoft[/company], it’s growing its market share slower than the overall market is expanding. [company]Apple[/company] lost share as well — dropping to 11.7 percent share in the second quarter of this year compared to 13 percent a year ago. There’s a difference though: Apple’s sales actually increased from the year ago period while Microsoft’s fell, based on IDC’s data. [Note that IDC’s data shows shipments for all since only Apple reports actual sales.]

So while Apple didn’t expand as quickly as the overall market it actually increased revenues; Microsoft and its hardware partners as a whole clearly didn’t. The only way these companies could have increased revenues on fewer sales would be if a greater mix of more expensive Windows Phone devices were purchased by consumers.

Again, IDC’s data splashes water on that bit of optimism: A tad more than 60 percent of all Windows Phones shipped in the last quarter were in the low-price range of $0 to $200. Looking at the chart you can see the other challenge presented to Microsoft. Its platform is competing heavily with Android at the same price range.

Essentially, Windows Phone is losing out to iOS on the high-end and Android on the low-end.

Some think there’s still reason to be optimistic about Windows Phone. Paul Thurrott, for example, thinks negative reactions to the IDC data is overblown because it’s only looking at one quarter’s worth of sales data. That’s a fair point. But taken in context of the past several years where Microsoft has retooled its mobile software twice while iOS and Android gobbled up the market, every quarter is important now. Still, Thurrott does see a few reasons for Microsoft to bounce back:

“But in April, everything changed. Microsoft announced “zero dollar” (i.e. free) licensing for Windows Phone. And it dramatically modified the hardware maker requirements for the platform to make it easier for Android device makers (i.e. every single device maker on earth except Apple) to reuse their existing device platforms to make Windows Phone handsets.

Device makers responded in force. Fully 14 new device makers signed on to make Windows Phone handsets in the first quarter during which these changes were in place—and the same quarter in which IDC claims Windows Phone sales fell to 2.5 percent of the market. There are 11 new devices hitting the market now, or soon, and many more in time for the holidays.”

I agree that the free Windows Phone licensing will bring more handset partners to Microsoft’s smartphone army. It already has. And Microsoft has radically improved Windows Phone 8.1. Subsidizing the licenses to gain market share isn’t a good long-term strategy, however. If it helps boost market share in the short term, it would certainly help change some developers minds from creating apps just for Android or iOS. Perhaps it would even get a few programmers to develop first for Windows Phone.

To me, that’s the bigger issue here and it’s a catch-22 of sorts for Microsoft: The company needs market share to attract more developer interest but it needs more developer interest to help sell phones with apps found on competing platforms.

Joe Belfiore, corporate vice president and manager for Windows Phone, holds Windows phones as delivers a keynote address during the 2014 Microsoft Build developer conference on April 2, 2014 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

Joe Belfiore, corporate vice president and manager for Windows Phone, holds Windows phones as delivers a keynote address during the 2014 Microsoft Build developer conference on April 2, 2014 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

At this point, Microsoft has developed a mobile operating system that I no longer hesistate to recommend to the masses. Hardware is also solid with a wide range of partners offering devices at different price points. And the early “app gap” has been closing: There are very few apps I personally I use on Android or iOS that are missing on Windows Phone. There are still a few; [company]Google’s[/company] apps in particular are a big hole here for me, but certainly not for everyone.

Unfortunately, I don’t yet see a compelling reason to switch to Windows Phone from Android or iOS or choose it outright. Apparently, neither did nearly 97 percent of all other smartphone buyers in the three months. And perhaps that’s Microsoft’s biggest problem of all, regardless of whether its market share is rising or falling.

35 Comments

Daniel

Windows phone will benefit from more apps. I think Xamarin will help increase the number of Windows apps and the low price will increase market share, especially in developing markets.
Hardware will keep getting better even at low prices.

The availability of office suite and other key Microsoft products, will help tablet sales in big corporations.

wong

loved my Lumia 920, but went back to Android. credit union app, hvac app, xbmc app, nzb app, and better VPN support, plus went away from ATT which wasn’t even close to the price of admission for the 920. LG G2 is fine with me even though the UI isn’t nearly as smooth as WP. There are more important things than smooth UI, sorry MS love you anyway but fix your shit.

someguynamedme

Naw, I think MSFT should continue to remain oblivious for a little while longer. The company needs a purge of insiders at the top level and the only way to do that is for their “vision” to continue to fail.

As long as anyone at the top believes that the desktop/laptop market is the same as the tablet/phone market, they will not gain a decent foothold all while losing on the PC side.

avro105

Let’s face it, Windows Phone is dead in the water. This last quarter isn’t just a data point, Nokia was in so much financial trouble last year with Windows Phone that Microsoft had to buy the business from them. 14 new companies have signed up to build phones, but just like those that signed up for Windows RT, it is doubtful whether they will produce anything, let alone sell anything. Microsoft probably sweetened the financial pot to make them sign up.

Apple in trouble? I don’t think so. They just don’t dominate $400+ phones, they are in the $600+ market. Android hardly even plays there and take a look at who is making the profits. Apple.

Rahul Gangwar

Does any of you opposing Windows Phone even know the meaning of this line “MS is playing a long game…”?
UX : Trust me. If you can start “liking” Android cheap icons over period of long time then sure, very soon, you can can like UX of something that is actually nice.

Features: Almost every non windows phone user that i have met do NOT use 98% of those features that were actually introduced just to fool “98%” of intelligent people. God, 98% of people in the world were intelligent. I always thought the opposite.

App Store: Come on. How many of you think number of apps would kill windows phone platform. It’s a function of time only and in no way a judgement as to which OS is better. It’s like saying my car is better because there are more accessories available in market.

Also i never got it why would these 98% intelligent mass NEVER talk about security and privacy. I guess these are non essential features for them.

Finally, do you realize who is behind Windows Phone? It’s MICROSOFT!!!!

avro105

“Does any of you opposing Windows Phone even know the meaning of this line “MS is playing a long game…?”

Yes, it means for 4 years that Microsoft has been trying to get its act together in mobile and failing miserably.

We have had the just wait ….

Just wait for:

Windows Phone 7
Windows Phone 7.5
Windows Phone 7.8
Windows Phone 8
Windows Phone 8.1
Applications
14 more OEMs to come on line
the Parousia?

Microsoft has been tremendously unfocussed in all of this. First they were going after the mid-range, then top end, then the low end.

Anyone remember the Microsoft staging a mock funeral for the iPhone?

Josh.R

“Subsidizing the licenses to gain market share isn’t a good long-term strategy, however.”

google stole the market in the exact same way. Initially, and for a couple of years in a row, the only reason makers decided to use android was because it was free! So I think it is a pretty solid strategy.

Thomas

I think it’s important to look at the details. The one region where Windows Phone is reaching critical mass is Europe, and according to Kantar WorldPanel, its market share in the five largest European markets rose by 1.9 percentage points year-on-year, to 8.8 per cent in the three months to June 2014.

Windows Phone has now reached or exceeded the 10 per cent threshold in France and Italy, and is almost there (9.6 per cent) the UK. Windows Phone has even moved ahead of iOS in Spain, although with only 7.5 per cent share v 6.8 per cent for iOS. The weak spot for Windows Phone in Europe continues to be Germany, where market share is only 6.4 per cent (up 0.2 per cent year-on-year).

The overall fall in Windows Phone market share was driven by a collapse in market share in China. Microsoft should be concerned about this development, but it was not unique to Windows Phone. Over the same period, he market share of iOS in China tumbled from 24.7 per cent to 12.8 per cent (a drop of 11.9 percentage points in one year). There may be particular reasons for these developments, e.g. the rise of. Xiaomi and perhaps political pressure to avoid products from US producers.

For the time being, I think Microsoft should focus primarily on achieving critical mass in Europe, and on competing with iOS at the high end. Despite the economic crisis in southern Europe, the EU remains the world’s largest economy (in exchange rate terms), so success in Europe should be sufficient to drive app development, which in turn may help achieve a break-out in the US at some point in the future.

John Nameshtard

To be perfectly honest I love windows phone. But that’s probably because I don’t like androids malware, and I’m not mentally challenged enough to stoop to iOS levels. As far as I’m concerned the apps are fine (I don’t need 4 facebook apps nor do I need multiple of any app) The app selection is everything most people need, back when I was on android I never needed any of their ad filled knockoff apps and I don’t need them on windows phone, in fact I’m glad they don’t exist. I’m really holding out for their One unified OS though. Everything in my home seamlessly connected.

kwright62

The broad release of Windows Phone 8.1 should have a significant effect on the number of these phones in use.

Chris

Windows Phone 8.1 is a quality mobile OS. It’s true that the app store lags, the feature set has certainly come a long way and has begin to make inroads within the enterprise, as it should. Customer perception is the biggest challenge, at least from the laymen perspective. I have Nokia 925 and often times others are surprised to see my start screen; wondering what it is. Not sure what it’s gonna take as the OS certainly has its merits (and limitations) but don’t they all ;)

George

It needs to be higher… but this quarter covers the Nokia acquisition and no notable new models. If Microsoft has made progress in, say, 18 months from now, it will be pretty difficult to sustain.

Phu Insho

Pretty biased article, why switch…..aside from a far superior experience, security is the single biggest aspect to consider. I could write for days on iOS and Android’s security flaw sagas…..privacy….

No mention of global sales numbers?

Michael

I believe death of Windows Phone are greatly exaggerated. I switched from Android to Windows Phone 8.0 and have been pleased. Was actually easier than when I adapted Android.

Mark

So that is one person. Believe what you want. Hey i have some betamax to sell you.

John Fitzgerald

Make it three Mark. It’s true. I totally dropped the Google ecosystem and switched over, and I love the WP environment.

Android is buggy, more vulnerable to malware, etc.

My Lumina Icon is no Betamax, it blows the screen off of any of my friend’s phones. Awesome screen, great camera, super fast, etc.

cheik

My windows Lumia experience is far superior than multiple android and apple phones over the years.

Tim

Make it five. I recently switched from a Nexus 5 to a Lumia 1520 and have found the Windows UI and experience far superior to Android, especially running 8.1 update 1. With every update it just gets better and better. I honestly don’t miss Google at all at this point and don’t see my self going back anytime soon.

bryan

Make that 4.

I switched to Windows Phone and Microsoft’s ecosystem a year ago and couldn’t be happier. I see Microsoft developing apps for multiple platforms while Google, Apple, and Amazon to a lesser extent do not. That alone makes me feel even better about shifting to Microsoft. I know my data will be accessible on any device I purchase regardless of the OS. Add 1TB of storage that comes with Office365 and you can’t beat it. Windows Phone is a delight to use when compared to Android.. I no longer have any interest in Android smartphones having had the pleasure to use Windows phone, and the Surface tablet. It’s a great platform that anyone would love if they would just invest the time to learn it. I remember the same whining and complaining when Microsoft introduced the start button in Windows 95.. Now look,.

Sumocat

Two years ago, Microsoft charged a fee for Windows Phone and imposed hardware design restrictions. Today, no fee, use it on whatever hardware you already have. Seems a little late to ask if they should be worried when they are clearly already worried.

The real question is: what is left for Microsoft to do to turn things around? I’m thinking strategic partnership with Lenovo (maybe HP) to push ecosystem packages: PCs + phones. Microsoft is laboring under a delusion that their strength in PCs will passively buoy phone sales when that clearly isn’t the case. They need a more active approach. Apple is taking a similar approach, though in the opposite direction, with Continuity features to push iOS users to Mac.

Art O'Connor

Android has almost all the market. Why? They have the largest profit margin for telecoms. Therefore, the sales people are told to push the androids. I find that most sales people have little or no training on Windows Phones. My problem with android is all the tracking and loss of basic privacy. My problem with iOS is how proprietary it is. Even the power connector is Apple only. I don’t want to have to use iTunes. I don’t want Quick Time taking over my Windows computers. When I plug my Windows Phone into my PC with a STANDARD USB cable, it shows up as a flash drive. No special software needed. Most sales people have no clue about the real advantages of Windows Phones.

shane

Microsoft hasn’t released a new phone to any carriers except Verizon for over a year. Its hard to sell phones when they only have 2 to choose from and those 2 are over a year old. Where are the new devices with 8.1??? Why did they buy Nokia again? I’m confused. Commercials for Cortana and no devices that run it. hello anybody out there?

unusialtu

Lumia 930 is a device with win 8.1 and Lumia 830 is following in first part of 2015….but anyway there are problems with this WP platform

jjj

“[Note that IDC’s data shows shipments for all since only Apple reports actual sales.]”

???
IDC reports shipments and Apple also reports shipments.
Apple does usually comments on inventory and that how one can determine sell-thorugh but they are not the only ones that might comment on sell-through, Apple doesn’t do anything special, nor is reporting shipments odd in any way.

As for the 14 device makers , does that guy know that Android has ,most likely, more than 14 new models every single day?
You go to Flipkart and there are 975 Android listings vs 71 Windows Phone (64 of those are lots of colors Nokias).
You go to CDiscount (France) and you got 930 vs 92 but 75 are Nokia.
You go to JD (China) and there are 1040 Android listings vs 22 Windows and all are Nokia.
And Microsoft still only supports Qualcomm ,that’s their biggest problem.

jjj

Also how exactly is Windows losing to iOS at the high end and Android at the low end?
You got over 20% of Android devices above 400$ and that’s over 51 mil units in Q2 vs what looks like at most 85% of 35.2 mil units so about 30 mil for Apple.
Saying what you said is simply not true or objective.
Apple is in more trouble than people think. Current smartphone prices, outside China, are way high and there is room for more than a 50% drop over the next few years.
The iphone 5s in China starts at 860 $ (at current exchange rates) while new Androd flagships that have a higher BOM than iphone are selling at 320$ , while older flagships go even 33% lower and anything above 100$ is rather decent (720p ,quad A7).
There will be more and more global competition and prices will decline hard (parts prices will too) while Apple has never been price competitive and they always keep margins.
Why would any intelligent form of life pay 2- 3 times more for a device that is inferior anyway? As their share declines their software ecosystem will also suffer ,especially in markets where they will end up with close to no share (sure they will report US app store numbers but those can be misleading).
At least Windows devices and other OSes will be able to compete..
Apple will have about 14% share this year, and they are dropping at 1 to 1.5% per year. next year they might keep share or drop 1% because of the new models should be bigger but that;s a 1 time thing and with Western markets saturated and developing markets not having significant carrier subs, things can get even worse soon. And that’s excluding steep price declines for Android devices. So Apple is likely to drop bellow 10% share in about 2 to 4 years and there is nothing but down until we replace smartphones with something else.

Yronnen

The last paragraph is where the article hits the nail on the head. Why should an iOS or Android user switch to Win phone? Especially when many of the existing user already invested some money in the other platforms eco systems (e.g. bought apps).

Also, there is a very obvious lack of support for WP from the telcos. Most of the WP devices are being sold as a cheap pre-paid device.

Eric

Except that the Windows Phone experience is better than both iOS and Android. Nokia’s high end devices feature significantly better cameras and if you are already invested in the windows ecosystem (I.e. 90% of US businesses) the integration with Office, Azure, One Drive and other window OSs is breast of breed. MS is playing a long game aimed at business users and productivity which neither Apple or Google dominate.

Bob Charlton

The Windows Phone experience wasn’t “better” for me. It wasn’t awful, but it wasn’t “better”.

Which phone you prefer is mostly a matter of personal taste, at this point. And that’s the problem for Microsoft, when people have spent the past 4-5 years embedding themselves into either the iOS or Android ecosystem.

As for this notion that businesses would force people to start using Windows Phones – even MSFT no longer believes that, which is why they now fully support iOS (or else risk an even worse fate of losing market share elsewhere).

By adjusting to this new reality, MSFT will survive and thrive, that’s for sure – but Windows Phone won’t. It’s done.

Mark

Better experience? I cant use my google stuff.

Integration with office/ azure/one drive matter little to most phone users. The app store matters more. And most people are using google services. and if not, they are using Apples.

James Newton

Integration with Office/azure/One Drive matters a lot to me and to the business community. Besides there is a fluidity, continuity and homogeneity across devices that certainly cannot be found in the Android ecosystem. That is a big plus for developers targeting this platform. Most apps on Android cannot run on the low end (60%) devices.

someguynamedme

No the Windows Phone experience is not better. MS’s long game is a long lose because they do not listen to any feedback at all. There is no “productivity” gain at all with anything Windows 8 outside of booting faster and their push to replace the keyboard/mouse with touch is as anti-business and productivity as you can get.

John Fitzgerald

Why switch? I was fully vested in the Google ecosystem, including Android. I switched over completely, and now use zero Google (or Apple) products. Two reasons.

First, I don’t want to be advertising fodder for Google. Period. With each WP app, I get to easily see and decide if I want to allow that app to have access to my world of information. And I have much more privacy in the world of Microsoft, especially email. It’s not perfect, but it’s better.

Second, the WP interface is awesome! I love it! It works beautifully. I’ve been using WP since 7.8 for over two years. I like 8.0 much better, especially on my Lumia Icon, and am awaiting 8.1 which I’m going to like even better.

So, there you go. Two very good reasons.

John H.

QUOTE: I have much more privacy in the world of Microsoft

That is a JOKE! Right????

MS invaded email account of a person totally unrelated to Microsoft, read persons emails, and then made emails public by filing lawsuits… Escuse? User agreement clearly allow Microsoft to go through persons emails.

Rann Xeroxx

All vendors are aware of your data. But the difference is that with Apple or Microsoft, they are selling a product, with Google you ARE the product.

Microsoft spent 2 billions a few years ago buying this user data mining company to get into the Google business with their expansion of Bing. There was a huge internal argument about this direction for MS and in the end, they sold the company at a huge loss and now only use user data like Apple does which is to enhance services.

So with either Apple or Microsoft, you are less exposed to data mining by third parties than Google.

xJonx

That’s not true. They invaded ONE email of a person they suspected was stealing from them … and as it turns out, they were right.

Secondly, EVEN IF, they just randomly picked ONE person to spy one, google is making money by scroogling EVERYONE who uses gmail. Not just one person, but EVERYONE.

Don’t you want to be paid for what you have that is valuable. Why would anyone willingly provide google with a means to make more money without google compensation?

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