BusinessWeek: Microsoft may need an acquisition to avoid losing out in smartphone market

Apple Online Store “Just a few years ago, Microsoft looked like a real contender in the mobile-phone market. Its Windows Mobile operating system ran about a quarter of all smartphones as recently as 2004, and it was gaining ground on leaders like Nokia,” Cliff Edwards and Olga Kharif report for BusinessWeek. “Then Apple and BlackBerry maker Research In Motion left the software giant in the dust.”

MacDailyNews Take: That RIM, with its antiquated BlackBerry OS, hopelessly outclassed by Apple’s iPhone OS, left Microsoft in the dust, shows how bad the situation is for lumbering Redmond.

Edwards and Kharif continue, “On Feb. 15, at a wireless industry conference in Barcelona, Microsoft will unveil its latest effort to get back into the game. The renamed Windows Phone operating system will ‘move the bar forward, not in an evolutionary way,’ promises Robert J. Bach, president of the company’s entertainment and devices division.”

MacDailyNews Take: Forgive us for not believing Microsoft when they promise anything, but especially when they vow to “move the bar forward.” We’ve heard it often, but never seen it, so confidence is low.

Edwards and Kharif continue, “Microsoft’s new software is much improved and has the advantage of easily handling word processing and spreadsheets sent from PCs. It will also be more integrated with the company’s Xbox game machine and Zune music player, so users can share music and videos among Microsoft devices. But that won’t solve another challenge the company faces in attracting customers. Independent software developers who create new applications for mobile phones have mostly ignored Microsoft and focused instead on the iPhone and Google-backed Android phones. Developers have cooked up more than 140,000 apps for the iPhone, available through Apple’s iTunes. There are about 800 available in Microsoft’s online mobile store, though the company estimates 20,000 applications will run on its mobile operating system.”

“Some industry analysts say the Redmond (Wash.)-based company should dramatically change course. It could opt to brand its own phone, like Google did, or strike a strategic partnership with a power player like Nokia. Several think it should make a major acquisition. “The logical thing for them to do would be to buy someone,” says Richard Doherty, co-founder of consultancy Envisioneering,” Edwards and Kharif report. “The most affordable choice would be Palm.”

MacDailyNews Take: Palm’s plan all along, as we’ve always said.

Edwards and Kharif continue, “But Microsoft CEO Steve Ballmer has said he’s not interested, sources within the company say. ‘[Palm’s] brand equity isn’t what it once was,’ says one Microsoft executive who works on mobile initiatives.”

MacDailyNews Take: The hits just keep on coming! May Steve Ballmer remain Microsoft’s CEO for as long as it takes!

Edwards and Kharif continue, “Richard Doherty, co-founder of consultancy Envisioneering, says another possible target is Waterloo (Ont.)-based RIM… [But] the Microsoft source, who requested anonymity because he is not authorized to speak to the press, says the company is not currently considering a RIM acquisition and is focused on its own internal efforts.”

Full article here.

MacDailyNews Take: The day Steve Jobs unveiled the iPhone, Microsoft didn’t know what hit them and, from the sound of it, they still haven’t figured it out. As they dither, time keeps on slippin’, slippin’, slippin’ into the future.


  1. “[Palm’s] brand equity isn’t what it once was,’ says one Microsoft executive”

    It’s not about the “brand equity,” it’s about the software!
    How good is it?
    Typical executive.

  2. @Touch,
    You’re most likely correct, and there’s probably too many divisions and competition within Redmond for a Palm Div. to succeed. Although if MS and Palm both get desperate enough, there’s an outside chance it may happen. At one time MS realized it had to ditch its old OS and go with NT to compete in the enterprise and server market. And sooner or later when MS acquires Yahoo it’ll be running Linux farm for a while. With Windows destined to die from its own bloat (how symbolic for a society suffering from obesity), this may prove to be the crossroads for MS.

  3. Microsoft was blindsided by the iPhone. Apple’s ability to scale OS X down to a real ultra-mobile computer probably caught them a bit off guard. And then scaling that version of OS X up to devices like the iPad will be the next step in shoving Microsoft out of the picture. If the iPad is successful enough, we may also see the beginnings of the Windows monopoly falling apart.

  4. “Move the bar forward” is a funny phrase in Microsoft’s case. Normally that metaphor is used in the sense of having to jump over the bar. It gets raised or lowered.

    What Microsoft is doing actually IS moving the bar forward; that is, not jumping over it at all but pushing it along in order to avoid any jumping. That’s apt.

  5. “I have been thinking, “what would I do” if I were granted the power to advise Microsoft at the top levels. And my M$ loathing aside, I think it is an interesting question.”

    – focus on the user experience, that is making it easier, not more difficult…installations and printer setup should be as easy as on OSX; don’t be such a bitch for every potential partner, ready to capitulate to their every demand even though it dooms the device (more DRM? SURE!)

    – get a good design team for all hardware

    – realize it is OK to not keep every legacy from 2001 – Windows is an Escheresque swiss army knife of OSes

    – keep Xbox

    – keep Zune

    – make own smartphone with OS, make iPad imitator

    the only reason the last two items are problems now is not that are bad markets to be in, it’s that they are fucked by the MS paradigm of not giving even the tiniest little rat’s ass about the consumer, not understanding that consumer experience drives products, and thinking that good design is lots of buttons.

  6. Apple’s got tons of cash oozing out of its offices. They should buy Palm and give it to Microsoft.

    Seriously, Microsoft buying Palm would be such a disaster now. Before Web OS this might have worked, but not now. There’s nothing Microsoft can do with it except watch it die.

    Microsoft is getting killed in the mobile market by several fronts. The iPhone on one front – great consumer/media device that’s fully integrated).

    The Blackberry – killing it with the business user and those that just want email with their phones.

    And the final nail is Android. Microsoft can’t do its usual strategy of trying to dominate by licensing because 1) They’re way behind Android and 2) They’d be competing with free. Why license from Microsoft when you can license Android for free, tap into all the software and developers for Android as well as all of the Google services which are included?

    Microsoft’s mobile strategy should be simple. Concentrate on providing software and services on the major mobile platforms.

  7. @ DresdenSparrow, @ DRMSSDB

    I’ve also tried to figure out what I’d advice MS — and really it’s a hard one.

    People say “aquire a company!” but that fails to take into account how difficult it is — sometimes IMPOSSIBLE it is — to bring together two corporate cultures successfully. If there’s one company I would bet could NOT pull it off, it’d be Microsoft.

    The best advice I heard was from a commenter over at (sorry I don’t remember who!), who suggested MS should make a build of windows for business, basically versions of XP that are more stable better without being flashier, to give businesses a REASON to upgrade, because “flashy graphics” sure ain’t it. This OS would focus on backwards compatibility.

    Then it was suggested they do a consumer OS that would have more “fun” in mind, which would break backwards compatibility in favor of performance.

    I have no idea if these ideas are any good, though. The puzzle with MS seems to be that their corporate culture is so toxic, it’s next to impossible for anything to get done well.

    @exemplified: LOL on the ‘facepalm’

  8. Microsoft has been doing quite well peddling good enough since the 80s.

    Do you honestly think they will finally admit defeat after 10 years and buy someone else’s Mobile OS?

    Not gonna happen.

    They will produce Mobile 7 and if no one wants it they will make their own phones and use Mobile 7 themselves.

    Don’t overlook the power of the one track minded, sales guy.

  9. > The renamed Windows Phone operating system will ‘move the bar forward

    Unfortunately for Microsoft, Bach was referring to the local “bar” where Microsoft execs get wasted, as they come up with this marketing garbage. The bar’s revenue will no doubt “move forward” significantly as Microsoft fight’s a losing battle in the mobile space.

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