Microsoft Promises to Update Windows Phone 7 Eventually

| Feb 15, 2011 | Consumer Devices | Analyst: Avi Greengart

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Event Summary

February 14, 2011 – At Mobile World Congress, Microsoft CEO Steve Balmer gave a keynote where he said that Microsoft would release a new version of Windows Phone 7 within four weeks that brings cut and paste, CDMA support, and performance improvements. Later in 2011, Windows Phone 7 will get background third-party music playback, Twitter in the People Hub, document cloud storage, and better browsing with HTML5 support. Microsoft also demonstrated Kinect integration.

Quick Take

Analytical Summary

• Current Perspective: Negative on Microsoft’s annual mobile OS update because the company is behind Apple and Android in terms of basic features, and the improvements Microsoft announced at Mobile World Congress are barely closing the gap while the competition continues to improve rapidly. The Nokia deal is an enormous win for Microsoft (see Nokia Jumps Off Burning Symbian Platform, Lands in Freezing Windows Phone Sea, February 11, 2011), but working with Nokia is only likely to slow Microsoft down further at a time when it needs to be rapidly accelerating its development efforts to leapfrog Apple and Google.

• Vendor Importance: Very high to Microsoft, because it is a computing software company, and computing is increasingly impacted by mobile devices and ecosystems. If Microsoft cannot make Windows Phone 7 a success it will have little immediate effect on the company’s bottom line but immense strategic implications – and significant bottom line impact – down the road.

• Market Impact: Low on smartphones, because – aside from the Nokia endorsement – Microsoft has done very little unexpected to improve its competitive position. CDMA support is a prerequisite for Windows Phone 7 devices at Verizon Wireless and Sprint, but this was already promised. Multitasking is a core market requirement, and even here Microsoft isn’t committing to iOS-style background thread support for more than music, let alone full blown multitasking and windows app management like webOS. The Nokia announcement will have far more impact than the eventual inclusion of IE9 or even Kinect integration: Samsung is likely to pull back resources but not exit entirely, as its strategy is to bet on every horse. Dell and LG are stuck – neither is terribly competitive in either Android or Windows Phone 7 – and this could make LG focus more energy on Android. HTC will move in the opposite direction, figuring that Nokia’s involvement should help Microsoft get traction with developers, and that HTC can innovate far faster than the restructuring Finns.

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Current Perspective

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