Should Microsoft rejoice over XP finally going south? Not with Windows Phone 7 at 1% new market share.

Microsoft has been trying to kill Windows XP for years, and it's finally paying off: XP market share has dipped below 50%, with Windows 7 sales more than taking up the slack. But Microsoft shouldn't rejoice, because the future is in mobile devices, and Windows Phone 7 has only a 1% market share of new smartphone sales, according to a just-released survey.

Net Applications reports that Windows XP had a market share of 49.4% in July, a drop of 1.3% from June. Net Applications isn't the only company reporting XP's decline; StatCounter said that XP's market share fell below 50% back in January and hit 43.9% in July.

At the same time, Windows 7 continues to gain market share. Computerworld's Gregg Keizer notes:

According to Net Applications, Windows 7 finished July with a 27.9% global usage share, an increase of seven-tenths of a percentage point over June. In the last year, Windows 7 has gained 13.4 points, more than making up for the 12-point decline of XP.

So Microsoft should be happy, right?

Well, yes and no. The company is no doubt pleased that it's finally managing to kill XP and that Windows 7 has been selling so briskly. But as Steven J. Vaughan-Nichols aptly notes in his blog, the future belongs to smartphones, tablets, and other mobile devices. Getting people to give up XP for Windows 7 and then Windows 8 is certainly nice, but having people buy Windows Phone 7 instead of iPhones or Android phones is absolutely vital. And that's where Microsoft is in trouble.

The latest bad news comes from a Canalys report on worldwide smartphone usage. And it's very bad news indeed. Windows Phone 7, the report found, has a scant 1% of the worldwide market for recently purchased smartphones. A press releasea about the report says of smartphone sales during the second quarter of 2011:

Fewer than 1.5 million Microsoft-based smart phones shipped during the quarter, equating to a mere 1% share of the global market, down 52% against shipments a year ago.

That means that Microsoft's splashy Windows Phone 7 rollout and multimillion dollar ad campaign resulted in a massive decline in market share.

At this rate, Microsoft will continue to dominate the desktop, and remain not even an also-ran on mobile devices. That would result in a company that still was immensely profitable, but a technology also-ran not able to deliver the kind of growth that investors expect.

The launch of Nokia Windows Phone 7 devices will certainly help. But it's not likely to be enough. Microsoft needs to re-examine its entire approach to mobile.

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