How Microsoft’s Windows Phone ’07 can beat Apple’s iPhone in market share

“IDC caused some chuckles to break out across the tech world when they predicted that Microsoft’s Windows phones will beat the iPhone in market share by 2015. Impossible! Absurd! seemed to be the default responses,” Jon Brodkin reports for Network World. “But is it really so far-fetched? Gartner, the other giant tech analyst firm, now agrees with IDC in a new report that says Windows phones will take 19.5% market share by 2015, compared to 17.2% for Apple’s iOS.”

“While it’s tough to predict outcomes in such a volatile market four years in advance, there are plausible scenarios under which Microsoft can topple Apple in market share,” Brodkin reports. “To do so, Microsoft must position Windows Phone 7 as a low-end smartphone, almost like a high-end ‘dumb’ phone, while Apple continues going after the highest, most expensive end of the mobile market. If your phone can check email, surf the Web, and play music and videos it already does most of what a typical iPhone owner uses the device for. And if it’s free, rather than $200 to $300, many people will take it.”

“The other factor working in Microsoft’s favor, of course, is the Nokia deal. Because of its dominant position outside the United States, Nokia still sells more smartphones than Apple,” Brodkin reports. “Today, those phones are Symbian-based, but they will be transitioned to Windows Phone 7 as fast as Microsoft and Nokia can make it happen.”

Brodkin reports, “There have been some reports that Apple will develop a cheaper, smaller version of the iPhone to go after the low end of the market, but that still remains to be seen. 2015 is a long way away in the mobile market, but the combination of Nokia’s existing market share and a Microsoft strategy to target the low end of the smartphone market could well be enough to drive Microsoft sales ahead of the iPhone.”

Read more in the full article here.

MacDailyNews Take: Yippie. Did IDC and/or Gartner predict the state of the 2010 smartphone market back in 2006? Even though we’d love to see those, we can’t find 2006 predictions from either company, so maybe they were much, much smarter back then.

If (big if) this happens, do we also get several years of idiotic articles exhorting Apple to make cheap phones, just like we had, and still have, to endure from the “cheap Mac” brigade? Revenue share is what matters most, not market share.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

Related articles:
IDC: By 2015, both Android and Windows Phone will beat Apple’s iOS in smartphone market share – March 29, 2011
Strategy Analytics: Apple took lion’s share of smartphone revenue in 2010 – March 16, 2011
Surging iPad shipments propel Apple to #1 in worldwide mobile computer market share – February 16, 2011
Apple’s 4.2% mobile phone market share accounts for 51% of industry’s total profit – January 31, 2011
DisplaySearch not afraid to count iPad: Apple #1 mobile PC maker in North America, #3 in world – December 7, 2010
To understand market share vs. profits, look no further than Nokia vs. Apple – November 11, 2009
How Apple passed Nokia to become the world’s most profitable handset vendor – November 11, 2009
Strategy Analytics: Apple passes Nokia to become world’s most profitable handset vendor – November 10, 2009
NPD: Apple grabbed 91% share of premium computer market in June – July 23, 2009

89 Comments

  1. What an idiot. Does he know WHY Nokia is abandoning Symbian and Meego? Nokia’s lunch is being eaten at the low-end by Chinese mfrs, and the high-end is a failure against iOS and Android. Going after the low-end is just what Nokia was trying to avoid. It’s a commodity strategy that was failing. WP7’s hardware requirements also make that a no-margin loser.

    1. Isn’t that why we should encourage MS?! Embrace It, MS… Embrace It! Just like the PC, go after the low-end commodity strategy and under Ballmer’s capable leadership, it will fail… After MS dumps Billions in R&D on things that are no way near Apple-esqeue in terms of desire, want, need, and profit.

  2. Good point MDN.

    M$ will have no qualms about going down the road of cheapo phones to boost unit sales. But who makes money on them? Pennies at most. Just like the vast legions of PeeCee box builders. Congrats M$ your market share of the PeeCee world is such a great experience for all involved.

    1. Yes, good point MDN. “Revenue share is what matters most, not market share.”

      And yet not one anal—–yst seems to understand that simple point. Actually they are pretty much a bunch of people spouting rules from 10 years ago.

      Just a thought,
      en

  3. I imagine the logic is, “Remember how Windows beat the mac?! Remember? REMEMBER?!!” That’s pretty much the chant of “Apple is destined to lose” folks.

    They seem to have forgotten about how it worked out with the iPod vs. Every Other Music Player.

  4. While these predictions are steaming puppykuck, Apple needs to give users mores options to customize their iPhones.

    One of the reasons many jailbreak to add skins.

    Why not add skins, add some weather info to home screen…

    what’s the big deal?

    I mean the whole conforming thing in the 1984 ad, now is Apple, forcing all user to have the same look on their phone?

    1. So you believe that “many” jailbreak to see skins that are rarely actually visible while either as a phone, in your pocket, or running apps where no one can see them?

      You bet.

    2. Oh yeah, that’s the answer: skins?

      The fact is, tens-of-millions more would buy iPhone if, (a) they could afford it, (b) they weren’t already stuck with their current plan, (c) they weren’t so ignorant about iPhone, and Android.

    3. People already have the option you say. And you mentioned it: jailbreak. Granted it’s not Apple’s first choice or idea, but it ia an option if you want greater customization. I for one am fine with mine as it is.

  5. This was the Kin strategy and that failed. For the low end Android will take over. Costs sensitive handsets won’t bother with a Windows 7 license when Android is free. Also bear in mind that the $8-$15 Win 7 license fee is an input cost so will translate to a much higher retail price $20-30. Don’t believe me, I can go and buy an off contract Android phone for £80-90 in the UK. Apple can also go for the low end it already sells millions of iPod touchs and could easily add a GSM/GPS chip and antenna to it. That’s what the Apple Peel does.

    Every time an analyst hails the next iKiller it’s worth remembering all the previous iPod, iTune, OSX, iMac, Macbook, Macbook Air and iPad killers that haven’t.

  6. I want to hear more about Nokia’s position in North America.

    Oh, they haven’t got one.

    I want to hear more about Nokia’s ability to sell low profit, high volume cell phones.

    Oh, they’ve been losing their shirts doing that for the last 4 years.

    Anyway you look at it, MicroNokia, selling high end, low cost, semi-smart cell phones at a loss and making it up on advertising, will be extinct in 4 years.

  7. I can see this happening. There is a growing need for a dumbed down, and less expensive version of current high-end smart phones, like the iPhone. And Microsoft has no problem trying to be the “quantity over quality” player in the field.

    That said, revenue share will always go to Apple, no matter what their market share is.

    1. A “dumbed down” smartphone? Uh, no, there is not a big demand for such a device. That already exists, they’re called Blackberrys. And people are buying fewer and fewer.

      A dumbed down iPhone will just get people mad because what they say and what they want are different. They really want a free iPhone, and they’ll bitch and moan and complain if Apple releases a cheap iPhone that doesn’t do everything.

      Besides, you can buy an iPhone 3GS for $49. If you can’t afford $49, you probably can’t afford the data plan anyway.

  8. Corporations pay hefty fees to subscribe to Gartner and IDC for advice and consulting. And what do they get for their money? Tired, east coast conventional wisdom supporting the status quo. And who do you think pays these companies more money than anyone else? You guessed right: Microsoft.

    Thus game worked back in the mid-nineties, but the game had changed. Even Apple aside, Microsift must also contend with Google. Windows has no price advantage against Android. And in the phone biz, neither an Android nor a Windows phone has a strategic price advantage over an iPhone. And if Microsoft wants to have Telcos sell phones at no cost, somebody is still eating the cost of the Windows licence, plus the cost of the phone. So why would a telco have any incentive to do business with Microsoft if an Android license is free?

    I call BS on market share. At the end of the day, companies win or lose on EARNINGS and CASH GROWTH. If Windows gains market share at the cost of either, or is yet another money loser for Microsoft, it’s a loss no matter how you spin it. It might cause Microsoft to give away Windows licenses for free and ape the Google business model to promote Bing. But I doubt that – Microsoft does not think like that. They’re too fat and happy with the old beige box way of doing things.

    Finally, what can Microsoft offer that its competitors don’t already? What is it about the Windows Phone OS that makes it stand out? Consumers aren’t always dumb. And the sales results to date show that.

    So bring it, fat man. This time though, the fame has changed. This time, you’re going to have your fat ass handed to you by Apple and others.

  9. Apple’s position in the industry can easily be compared to their prevalence with regards to the iPod. They transformed the market for years before they cut the head off the low end market with products like the nano and the shuffle. In a year or two, I predict Apple will again do the same, spreading it’s powerful market share to encompass the low market as well. Right now they are after margins, when they are comfortable with their positioning, they will skew the low end, and their own margins, to achieve similar market presence as they have in the past with the iPod.

    1. I would agree but Apple never let a competitor surpass them (or even come close) in market share with the iPod. Android has already done this and done it very quickly.

  10. Microsoft will never outdo Apple in the phone business.

    The first reason is that Microsoft is developing Windows Phone 7 for hardware manufacturers, while Apple is developing the iPhone for users. Users, not manufacturers, buy phones and create the market share.

    The second reason is that Microsoft is aiming at a moving target. Apple doesn’t divulge competitive information.

    The third reason is that Microsoft is buyer oriented while Apple is user oriented. For Microsoft, the relationship with the buyer ends when the product enters the pipeline. For Apple, the relationship with the user begins at the point of sale.

    The fourth reason is that Microsoft does not have a direct relationship with its customers. The customers’ perception of Microsoft is governed by their experience with the vendors, which is out of Microsoft’s control. Apple has a direct relationship with its customers, even if there is a vendor in the middle. The customers’ perception of Apple is under Apple’s control.

    The fifth reason is that Microsoft thinks that to sell to the enterprise market, they have to design for the enterprise market. Apple proved that’s not true.

    The sixth reason is that WIndows Phone 7 is a me-too product. They market the Windows Phone as the consolation prize for people who cannot, for some reason, buy an iPhone.

    The result is that Apple’s iPhone will always be a step ahead. It will always have happier customers, and it will always sell more than Microsoft. Windows Phone 7 can never overtake iPhone.

      1. Ken’s analysis is spot on and honest. Do you think MS wants to hear the honest truth, though?

        MS wants to hear something encouraging and bullish, something that gives the shareholders hope, not an honest assessment of where things are and what the honest trend might be based on today’s realities.

        Sure, Ballmer might have a heart attack and Bob Muglia might come back and do something phenomenal with WP7 that will make it much more appealing and worth a second look.

        Sure, pigs might fly.

      2. Good one, but nit to pick about Apple’s relationship to customers- it’s direct and live, through the Genius Bar and to a lesser extent the Apple Store sales staff, they’re getting feedback on what’s getting attention positive and negative, and response to selling points. That’s a big advantage to have, one that no other player has.

    1. All of which equally applies to the Mac platform.

      This is just good business and why Apple is a leader. Besides everyone knows, Microsoft does the direct opposite of Apple and they like that strategy.

  11. I don’t think Apple cares too much about growth market share, as long as it keeps stinging the important share (the wealthy). Apple could throw in a cheaper phone but for what? That will be shared through a gazillion handset manufacturers anyway… basically 73% of dog scraps..

    1. Apple already has a “low-end” iPhone strategy and it’s in the form of continuing to sell the last-generation 3GS.

      When iPhone 5 is released, iPhone 4 will become the “low-end”.

      For most consumers, last year’s model is obsolete and obsolete suddenly becomes low-end. Who but the cheap (or the broke) would buy last year’s model of anything?

  12. Boys boys boys. This MS strategy has worked in the past, and will again. Volume volume volume by lowest price almost wins out every time.

    Not just MS versus Apple, Commodore, et al, but look at:

    McDonalds versus BK, Jack in the Box, et al,
    Toyota/Ford vs too many to name,
    WalMart vs too many to name.

    If Apple doesn’t introduce a viable low end iPhone (and computers as well), or cut it’s margin, it will be forever a market niche player, albeit an extremely successful and wealthy one. Good for their stockholders, but bad for user-end.

    Argue iPod and iPad dominance (iPhone is clearly not of that crowd) all you want, that’s still niche products when compared with computer and phone markets.

    We’ve seen this story before and we know how it ends.

    Face it Liberty is dead….

    1. Toyota v. Ford? Toyota is more expensive and better quality…

      M$oft doesnt HAVE a ‘strategy’. They wouldnt know how to begin.

      Apple, the niche player, as you call them, is worth as much as M$oft and Intel put together.

      15% of the market, over 50% of the PROFIT.

      History is bunk, and so is your post.

      1. History. Sometimes you have to have lived it to understand it. Toyota and other Jap autos invaded US with low-cost products to get that market share and then upped the product prices; they still compete on some models, price wise, such as the Tundra going after the F150 at first. They also upped their prices, as does Apple, on the ‘quality’ BS reputation (quality was only better as long as US automakers out out the crap they did in the 70s, early 80s: we’re much more competitive now — buy American or it’s bye America).

        And hey, FANBOY, I acknowledged Apple’s profitability. Grow the f*#k up already.

        Liberty is dead, get used to it….

        1. WRT the Japanese cars, Toyota made a foray into the US market in the 50s with something called a Toyopet. It failed miserably. Then they went back to the drawing board and produced cars that were indeed cheap but also got better gas mileage and were light-years ahead of Detroit regarding quality. I went through a Ford and two Chevrolets in the early 70s, three cars that constantly broke down (bad brakes, blown head gasket at 4500 miles, faulty thermostat, a steering wheel that came loose…) so I finally caved and bought a Toyota Celica in 1975. That lasted until 1987 and 200,000 miles. Quality was the name of the game. And yes, I know that Toyota quality has sunk in recent years and Detroit quality has gone up. I will do my research befor ebuying my next car (Consumer’s Reports anyone?)

          1. i drive a 95 Ford Windstar, 220,000 miles and going (knock knock), hopefully at least another year when I replace it for either another Ford, maybe a Chevy if Obama shares get sold back into the market.

    2. This MS strategy has never worked in the past, Smitty.

      MS succeeded by putting up barriers to competition at every possible opportunity, never caring if it was illegal. Not by slapping their crap on cheap hardware and calling it a day.

      WinMo7 is like hamburgers filled with broken glass. Doesn’t matter if its priced cheaply and you ship it in large volume, shit just ain’t desirable. Only way people are going to buy them is if they don’t have a choice, and Microsoft doesn’t have the same power to take away choice in 2011 that it did in the 1990’s.

      Also, Google has MS beat in the volume-volume-volume-by-lowest-price game. Even if you were right about it being a winning strategy, MS has been beaten to the punch by their own spiritual successor, and has no hope of retaliating. Because what are they going to do? Undercut Android’s price of $0.00?

      1. Hey there my brother from another mother!

        Not working!?! Uh, MS has like 85% of the WORLD OS market last I heard.

        Citing Google just proves my point. They’ve quickly penetrated the market with free shit (which, like MS, there code is), just like, oh, I don’t know, MS did with EXPLORER when browsers actually cost money.

        What will help MS’ strategy into the phone market OS it’s compatibility with it’s computer OS. Which Android/Google lacks. Not to mention MS’ software labor force and support (don’t snicker; it may suck in comparison to Apple’s quality, but it’s huge and I think that’s what Nokia is looking at, along with others.

        Free is worth about what you usually pay for it.

    3. iPhone 3G = $0 w/ contract. iPhone 3GS = $49 w/ contact. After iPhone 5 is released this year, the iPhone 4, 16GB = $99 w/ contract, 32GB = $199 w/ contract. You must see the effect & trend hear. A real SIMPLE business model for Apple, that has them winning!

      1. bingo… The cost of the iPhone is in the service plan and data plan that you choose – not the iPhone. The iPhone to purchase is the same price as most other smart phones before they start their BOGO promotions. Some of us are happy to pay $2-300 per year for a new iPhone and new contract. Those who are not, have options (as above).

        The growth will happen when AT&T and Verizon start to compete with their pricing for the service and data.

    4. The McDonalds and WalMart comparison is interesting, however you miss the reason for their success. Location, Location, Location. Both companies do a lot or research on growth areas and buy property early, while their competitors jump in when the market is established. Apple is looking at growth areas in tech everyone else is jumping into the new hot market. Apple will win.

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