Microsoft Smartphone Dissected - a new report from EDGE Consult

Wireless Developer Network - EDGE Consult, ARCchart's research and consulting division, has announced the launch of the first comprehensive study of Microsoft's move into the mobile handset market. This new report, "Microsoft Smartphone Dissected - The entry strategy, chances of success, and the impact Smartphone will have on the handset industry and Microsoft's balance sheet" estimates that while only 1.6 million Smartphone handsets will be sold in 2003, representing just 0.4 percent of the total handset market, this figure will rise to 28 million units in 2005, 5.8 percent of the total handset market.

Microsoft Smartphone is not having an easy birth. Orange has managed to sell just 60,000 of its own-brand SPV handsets across its territories in the four months to April this year. Smart Communications in the Philippines is the only other operator to have launched a Smartphone device. The software giant is also having problems getting handsets to market. HTC is the only manufacturer with a commercially available handset and resistance from the Symbian camp is fierce and well organised.

Microsoft is however running a strategy that anticipated a hostile reception for Smartphone. EDGE Consult identifies the five fronts on which the software giant has launched attacks in order to secure a presence in the handset OS market and Microsoft's performance on each so far is assessed.

"Microsoft's position is not impossible. Samsung and Motorola have demonstrated that they are not opposed, in principle, to producing Microsoft Smartphone handsets, and the platform's ability to drive data revenues will be compelling for network operators" comments Matt Lewis, Senior Analyst at EDGE Consult. "But it does have immediate issues to address."

Smartphone is a key component of Microsoft's broader .NET strategy. EDGE Consult examines .NET and how the new handset OS fits in. Modelling an optimistic scenario in which Smartphone seizes 20 percent of the total handset market by year-end 2005, the report shows license fee revenue increases Microsoft's total revenue by just 1.4 percent.

"Microsoft is not playing this game for the license fee revenues alone" comments Adrian Drury, lead analyst on the report. "Smartphone is about multiplying the addressable market of .NET devices and generating revenues across Microsoft's operational divisions. While the handset vendors focus on stagnating annual shipment figures, Redmond will be watching the growth of an accumulated installed user base."

It is a smart move for the traditional handset vendors to oppose the entry of Microsoft into the handset market. Microsoft's standardised hardware platform strategy will catalyse handset commoditisation, lowering the barriers for new entrants into the handset market.Consumer's handset utility will be driven away from the device hardware towards software and applications, and industry profits will follow.

For more information on this report, please contact Sam Bedha of EDGE Consult.