In Barcelona this week, one of the biggest cell phone shows in the world is being held. As is Apple's policy, it wasn't officially there, but I have little doubt that Apple employees attended. They saw a wave of competitive products targeting consumers, and one merger that will create an end-to-end solution like Apple's. This comes at a time when Apple is starting to open its own platform to developers. Many of these products will hit the market at about the time Apple is expected to make a run for the business buyer.
To be successful, you need to be attractive to consumers but also be acceptable to businesses, which pay for most of the related, expensive data plans. Comparing Apple and Microsoft, Apple has the more attractive and complete single device, but Microsoft leads in business support and breadth.
Let's take a look at the competitive dynamics across the consumer and business cell phone segments for the Western world.
How the Consumer Market Lays Out
The major well-funded platform players are Apple and Microsoft. Symbian relies on its partners and doesn't have the resources that Apple or Microsoft can bring to bear. Linux, for the phone, is even more poorly funded. RIM is more of a business player, while Google has yet to enter the segment, but could surprise everyone and change this segment radically.
Apple's strengths are solid design, market-leading ability to create demand, control over the solution (both front and back end), user interface, rich lines of third-party accessories, best phone Web experience and hardware design. Its disadvantages are cost, the lack of device choice (one size never fits all), limited carrier coverage, poor text experience and a design that won't let consumers replace the battery.
Microsoft's strengths are choice of devices and carriers, robust developer ecosystem, great text experience on many devices, financial resources, and connectivity charges for which companies can justify the expense. Disadvantages are inconsistent and often unattractive designs, lack of control over the solution, poor to non-existent marketing, complex UI, no consistent accessory support (no cross-vendor plug compatibility) and a poor Web experience.
If we measure success in this segment by market share, Apple has too many hard limitations in terms of folks who sell the phones, partners, and choices to dominate this segment like it does the MP3 segment. But it could become the largest cell phone hardware supplier if it expands its line successfully. This should concern -- and apparently does -- folks like Nokia a lot.
Microsoft lacked the control over its solution needed to assure it could take Apple out if it addressed most of its own shortcomings, but with the acquisition of Danger, Redmond closed that gap. However, it should have been able to beat Apple with MP3 players and didn't. Apple created a more compelling product in the iPhone in months than Microsoft was able to do in the years it has been in this space. That suggests Microsoft didn't have the needed agility, and products such as Origami, Media Center and Windows Vista indicate an ongoing problem in meeting consumer expectations for complete offerings.
Now let's switch to the business segment because the two, for smartphones, are interrelated.
Business Market Dynamics
The cell phone market is different from the PC market in that companies can select calling plans, carriers and sometimes platforms, but the user generally chooses the phone. RIM, which is undergoing problems, is the exception, behaving more like a PC company. HP is attempting a similar model with Microsoft to move more aggressively into this segment.
This means that you don't need an enterprise sales force to move aggressively into this segment, you just need the right set of partners and a device that folks want to use. Apple is slowly getting the right partners, a number of them business-class, and is expected to announce ActiveSync support for Exchange this year.
Microsoft sells most of its products to the enterprise and if the phone market were to become like the PC market, Microsoft would have an almost insurmountable advantage. (In fact, there is a lot of talk that the PC market actually will become more like the phone market, instead.) The same dynamics that created Microsoft's dominance in PCs would work here. But that's not the trend I'm seeing, which also puts RIM at risk.
Wrapping up: Who Wins?
Microsoft Mobile, particularly after the Danger acquisition, will be substantially different. It will allow Microsoft to complete its offering.
Apple remains limited by its single phone, though it could address that issue by releasing two or three additional designs just as it has with its four iPod products. It also likely will have adequate connectivity for enterprise e-mail systems shortly. Its one major long-term problem is carrier coverage, which is limited in every location and effectively locks it out of other carriers' market share. Given its existing contracts, this is a solid barrier for the next several years, but could disappear when existing agreements expire.
Microsoft has to assure a complete solution, at least some highly desirable devices, commonality in accessories, and a more compelling user experience. HP's Oak, Sony/Ericsson, HTC, and Neonode (links are to articles on these iPhone-like devices) could fix the device problem. HTC (Touch), HP (TouchSmart/MediaSmart), Neonode and Microsoft itself (with Danger) can address the UI. The question is, will it? Microsoft Sync might address the accessories problem, but is limited now. And HP can create a complete solution and compelling user experience outside of Microsoft. Danger could drive Microsoft to fix this internally, but could and will are two different things.
In short, for Microsoft to win this, it needs to get out of its own way to focus on a complete and more compelling user experience. Apple wins if Microsoft can't do this by the time Apple finishes its own line and becomes carrier agnostic. RIM and Google are wild cards and could surprise both of these vendors. But, for the market at large, they don't have either the mind share (Apple) or market share (Microsoft) needed to take more than a small portion of the market.