Microsoft has a relatively long history with mobile operating systems, stretching back to the mid-1990s and Windows CE. Developed originally for "embedded systems," Windows CE quickly found its way into PDAs and eventually phones, and while consumers never warmed to the platform, it did achieve a level of success in the enterprise.
Microsoft doesn't tend to invest time and capital into market segments it can't dominate, which makes one wonder how it is still a distant fifth in the worldwide smartphone market. According to IDC, Windows Phone 7/Windows Mobile will capture roughly 4 percent of the worldwide smartphone market by the end of 2011.
However, IDC predicts that once the next version of Windows Phone 7 arrives in products later this year, Microsoft will be on firmer footing. In fact, IDC is so bullish on the future of Windows smartphones that it predicts Microsoft will capture more than 20 percent of the market by 2015, moving ahead of iOS and behind only Android.
Here are four reasons why Microsoft will be a major smartphone player in a few years.
And three reasons it won't.
1. Will: Strong Partners, Deep Pockets
Ever since Microsoft announced its partnership with Nokia back in February, tech pundits have been buzzing about a possible acquisition. A bad earnings forecast for the second quarter of 2011 released by Nokia in early June added fuel to the fire.
Thus far, none of the rumors have amounted to anything more than talk. What shouldn't be overlooked, however, is that this partnership alone is a big deal.
"The partnership with Nokia is a stroke of genius," says Brian Reed, vice president of products for BoxTone, a provider of mobile device management services. "Nokia is fighting for its life. The company needs Microsoft, and Microsoft needs a strong mobile partner who can deliver compelling hardware."
Don't forget that, despite Nokia's recent troubles, it still has the largest installed phone base and an overall strong brand.
"One major advantage Microsoft has is that by being largest software vendor in world, they can bring together more pieces of both corporate and consumer value chains than anyone else," Winthrop says.
Compared to Google, Microsoft has a much longer legacy of selling to consumers and enterprises. They have stronger relationships. They have a stronger sales channel, and even though they lag behind Apple, Android and even BlackBerry as far as apps are concerned, there are still plenty of Windows and Windows mobile developers out there. The gap could close quickly.
2. Will: Cloud Computing and the Advantage of Openness
When Apple announced its iCloud cloud service, they drummed up a ton of coverage for something that would make any Windows or Google Apps user say, "So what?"
Google and Microsoft were both more aggressive than Apple about rolling out cloud services, but even if iCloud is Apple playing catch-up, services like iTunes Match and Book synching will make the iPhone even stickier. Looking at smartphones through the consumer prism, why would an iPhone user abandon the platform for Windows Phone (or Android for that matter)?
However, if you look beyond a single device to a larger device ecosystem, the decision to stick by a single vendor becomes more complex. If you're an Apple fan boy, you'll be fine being stuck with iPhone, iPad, MacBook and on and on.
But what about devices Apple doesn't offer? What if in-vehicle GPS units are able to interoperate easily with phones on other platforms? What if you prefer a different tablet than Apple's?
Today's cloud services follow two distinct and nearly opposite strategies. Apple's iCloud will be as closed as most of Apple's other offerings, while Google Apps is wide open. If Microsoft can navigate some sort of third ways, where enough proprietary add-ons are available to create stickiness, but the cloud services are open enough to provide a platform for strong, unexpected third-party innovation, Microsoft and Windows Phone could benefit.
"Many companies are moving to Office 365 or are planning to. By moving application logic and data into cloud, it's now much easier to move data across devices," Reed of BoxTone says. The Windows cloud could easily allow greater device-to-device sharing, even across devices from competing vendors. Moreover, since Microsoft owns the desktop, Microsoft's cloud could be far more compelling than Apple's or Google's as a hub for photos, contacts, music, calendars and more, a hub that you simply log into with any device from anywhere to access whatever digital assets you want.
Productivity, communications and collaborative apps, all with added functionality and cross-platform availability via the cloud, could set Windows Phone apart from other smartphones. Of course, this means that the smartphone provider that should really fear Windows Phone's rise in the short term is BlackBerry.
3. Will: a More 'Productive' Phone
Although Windows Phone 7 is being targeted at consumers, Microsoft's strong history with productivity and business could become a significant differentiator.
"Windows Phone delivers the most seamless Exchange email, calendar and contacts experience, enables full access to documents on SharePoint sites and rich viewing and editing of Microsoft Office documents such as optimized mobile navigation in Word and editing in PowerPoint. Additionally, IRM support, alpha-numeric PIN and Exchange server search are just a few of the features coming in the Mango update that will enhance mobile productivity," says Tim McDowd, senior manager, Windows Phone.
Microsoft's expertise with productivity influences even consumer-focused features. Instead of taking an app-based approach, Microsoft built Windows Phone 7 around a task-centric philosophy.
"Android is mimicking the iOS experience, but Microsoft is trying something different," says Winthrop of The Enterprise Mobility Foundation. "The perfect example of their task-focused approach is the People Hub. You not only see contacts, but you can also see what they're doing." People Hub integrates into Facebook, and it will ultimately integrate into other social media, such as Twitter. "There's also an aesthetic difference. Do you want to be constantly swiping between panes, or do you want to access information where it's natural?"
4. Will: Beyond Tablets, Smartphones
Tablets and smartphones are all the rage today, but neither became popular overnight. Who knows what devices will catch fire in coming years?
Chris Fleck of Citrix believes that Microsoft should do its best to bring new classes of mobile devices to market. "The Windows Phone hardware today is good enough to use but not innovative enough to prompt users to change," he says. "A smartphone was a phone plus a PDA. Now, there's an opportunity to develop 'Nirvana phones.' Take the phone and do more with it. Dock it. Connect it to virtual desktops. Connect it to high-resolution video displays."
Of course, such devices exist today -- the Android-based Motorola Atrix being the best example - but they're not really capturing consumers' attention yet. As prices come down, that should change, perhaps giving Microsoft just enough time to work on its vision for the so-called "Nirvana phone" before competitors beat them to the mobile punch yet again.