Windows Phone 7.1: 500 Upgrades, but Only Nokia and Skype Matter

Rob Enderle

Microsoft showcased the 7.1 "Mango" release of the Windows Phone platform, which has received positive reviews but little in the way of customer adoption. I'm a Windows Phone 7 user myself and I am actually rather impressed with the current level of technology. However, moving against two already established vendors like Apple and Google will be daunting. Apple controls its ecosystem, has its own large store chain, and some of the highest customer satisfaction scores in the world. Google gives Android away for free and users appear to be pretty happy with their Android phones as well.


Microsoft's attack vector appears to be on two fronts: Optimize the UI for how people actually use the phones and use social networks as a blunt object to be used against competitors. Not a bad strategy, but to be successful, Microsoft will need to have a relatively dedicated partner that has the scale to go against both Apple and Google. That makes Nokia, and to a lesser extent Skype, Microsoft's WMDs in the coming fight.

Google: The Easier Target

Apple is going to be very tough to beat, but Google appears to be a relatively easy target. This is because Google's model does not return much revenue to the phone-makers and it is often marketing co-op dollars that pay for both the launch and to sustain marketing for a new device. That means that the marketing organizations in companies selling Android devices are being starved and are aggressively looking for an alternative. In addition, Google has been changing versions so often that many of the device-makers simply can't keep up. This has been particularly painful for the failed tablet-makers that recently just finished their work on Honeycomb only to have Google announce its successor (suddenly, I really want an ice cream sandwich), putting those launching Honeycomb tablets in the second half in a massive bind.

I've actually never had as many people before that seemed to suddenly be wishing Microsoft well in the hope that one of Microsoft's products was good enough to allow these guys to say "goodbye" to Google and return to happier times. HP went south so fast it actually bought Palm.


But the problem is that many of these folks need both a smartphone and a tablet platform and Microsoft's Windows 8 is estimated to be more than a year and a half out.

Nokia: Wild Card One

Nokia is, even though clearly in decline, the largest cell phone manufacturer in the world and, interesting enough, strong where Apple is weak and weak where Apple is strong geographically. It doesn't have much of a U.S. presence anymore, which is where Apple is pre-eminent in terms of hardware. Nokia is incredibly powerful in Europe and much of Asia where Apple is vastly weaker. It has very strong retail and carrier relationships outside of the U.S. An attractive, well-marketed, line of Mango-based phones could launch the Windows Phone platform into a player, opening up interest with the other phone-makers that are sick of Google - most of which live in Asia.

This makes Nokia Microsoft's biggest wild card, but not its only one.

Skype: Microsoft's Ace in the Hole

The idea of being able to use a digital data service in order to bypass carrier call charges particularly for international calls using Wi-Fi is a very compelling one. Few phones do this well and most don't do it at all. Skype is the leading Voice over IP provider in terms of customer base. It has the greatest international coverage, though it has run into local service difficulties in some countries that have led to it being blocked.


Microsoft has vastly greater resources to deal with problems like this than Skype or Skype's old owner, eBay. The end result could be a unique phone service that neither Google nor Apple could match that automatically switches to Skype when available and provides a vastly more integrated and cheaper phone service. It is a similar, least-cost routing feature that paid for most of the private phone systems that exist in companies today and it could provide significant individual financial incentives to future Windows phone users. Folks do like saving money.

Wrapping Up

This will be a critical year for Microsoft's Windows Phone Platform. If Nokia and Skype play as expected, Microsoft could move from being an interesting also-ran to a real contender next year. Once in contention, Microsoft could then begin to drive together its Windows 8 and Windows Phone 8 platforms into a solution that should be more compelling than Google or Apple have today. However, late 2012 is a long time and both Google and Apple won't be sitting still.


A young Microsoft caught a young Apple from behind and an older Apple passed Microsoft as if they were sitting still. The question is: Can Microsoft return the favor? Actually, maybe the question really is: Will they return the favor?

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