Windows Phone sales stall again -- can anything save it?

The latest figures show that sales of Windows Phones have stalled, mired at 4% in the U.S., and 1% in China. Is there any way for Microsoft's smartphone operating system to become a success?

The most recent sales figures from Kantar Worldpanel ComTech for the three months ending in December 2013 hold no good news for Windows Phone. In Europe, it's maintaining around a steady 10% market share, which it's had for months, but not increasing any. In the world's two largest smartphone markets, it's made no headway at all -- 4.3% in the U.S., and 1.1% in China. That's about where it's been for months. Even compared to a year ago, it hasn't made much headway. A year ago it has 2.4% market share in the U.S., and 0.9% market share in China.

As for the other big growth market, South America, it's done dismally there as well. Its market share has dropped in the last year, from 6.8% to 4.9%.

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Dominic Sunnebo, strategic insight director at Kantar Worldpanel ComTech, says this is all bad news, even the 10% market share in Europe:

"Windows Phone has now held double digit share across Europe for three consecutive months. Unfortunately for Nokia the European smartphone market is only growing at 3% year on year so success in this market has not been enough to turn around its fortunes -- reflected in its recent disappointing results. Its performance also deteriorated toward the end of 2013 in the important growth markets of China, USA and Latin America."

This bad news comes only days after more bad news, Nokia's most recent earnings report. The company reported that sales of its Lumia Windows Phone devices smartphones dropped to 8.2 million devices from 8.8 million devices in the previous quarter. That's even worse than it sounds, because the fourth quarter covers the holiday buying season, when sales should spike.

The earnings report also revealed that the handset division that Microsoft is buying had an operating loss of 191 million euros. A year ago, it had a profit of 97 million euros.

With little or no growth in the world's largest and fastest-growing smartphone markets, and hanging on to only a 10% market share in the slow-growth European market, what can save Windows Phone? At this point it's not clear that anything can. Microsoft has floated the idea of giving it away for free for manufacturers, and that might be a good first step. But it's clear that Microsoft needs to do something dramatic if Windows Phone is going to succeed. It's not likely that CEO Steve Ballmer will do it. So whoever takes his job will have to come up with a big idea. If not, what Microsoft sees today in Windows Phone market share is what it will see tomorrow -- at best.

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