Microsoft touts 1.5M Windows Phone 7 smartphones sold

Claims sales similar to other first-generation mobile platforms, admits 'tough competition'

Microsoft today said makers of phones running its new Windows mobile operating system had sold 1.5 million handsets since the October launch of Windows Phone 7 (WP7).

Microsoft's head of Windows phone marketing announced the sales figure and said they were in the expectations ballpark.

"Sales are ramping well ... and are in line with our expectations, especially when compared to other new platform introductions," said Achim Berg, a Microsoft vice president of business and marketing for Windows phones, in a Q&A posted on the company's press site.

Berg called Microsoft's expectations for WP7 "realistic," and like the company's CEO, Steve Ballmer, said the new OS was essentially a do-over.

"We started fresh with Windows Phone 7, and it's a different kind of phone. Measuring for success is more long term than short term," Berg said. "[But our] numbers are similar to the performance of other first generation mobile platforms."

The 1.5 million figure does not necessarily mean that many consumers have a WP7-based device, since manufacturers typically sell their handsets to mobile carriers, who in turn re-sell the smartphones.

Analyst Jack Gold of J. Gold Associates estimated that, assuming 20% of the 1.5 million are still in carrier sales pipelines, consumers owned approximately 1.2 million WP7 smartphones.

Handset makers began selling WP7 smartphones to European customers in October, and to U.S. consumers in early November.

"At launch, Windows Phone 7 was underperforming," said Ramon Llamas, an analyst with IDC, referring to the paucity of product when AT&T and T-Mobile launched WP7 devices last month in the U.S. "But the marketing push since then has been pretty solid."

"I don't think that those sales are bad, but they're not in the same category as an Android or iPhone launch," said Gold, "although Microsoft is certainly doing much better than they did with the Kin." He was referring to the phone Verizon yanked last summer after dismal sales.

Llamas, however, declined to characterized the 1.5 million milestone as either strong or weak.

"You can't judge a product by its launch," he said. "Are there millions using WP7? No. But right out of the gate, Microsoft's put WP7 into consideration. That's what [Microsoft] wanted."

He wasn't surprised at the sales number Berg quoted. "AT&T has been running a buy-one-get-one-free [WP7 phone] promotion since November, and after all, this is the time of the year for consumers to look at smartphones," Llamas said.

But Microsoft has a harder row to hoe than did Apple when it launched its first-generation iPhone in mid-2007. "They're trying to convert all those Windows Mobile naysayers," Llamas said of the poor reception Microsoft's previous mobile operating system received last year.

The key, Llamas argued, is that Microsoft is now at the smartphone table, a point other analysts have made. "They've at least piqued user interest, and that's important," he said.

Apple sold approximately 1.4 million iPhones in the first three months after its June 2007 introduction, but since then competition has dramatically increased. Google, for example, boasted several weeks ago that carriers are activating an estimated 300,000 Android-powered phones daily, while Apple said it sold 14.1 million iPhones in the quarter that ended Sept. 30.

Berg acknowledged that the sales of 1.5 million devices notwithstanding, WP7 has a long way to go.

"We know we have tough competition," Berg said. "We're in the race ... and we're in it for the long run."

Gold was dubious.

"I don't know what Microsoft's magic number it is, but at some point in the next eight to 12 months, if sales don't increase, they'll have to look and ask themselves if this is too expensive for them," Gold said.

"They're not setting the world on fire, and if they can't accelerate sales, Ballmer will have to say, 'We're getting our clock cleaned, why are we in this business?'" Gold added.

Five handsets powered by WP7 are available in the U.S. from AT&T and T-Mobile, including models from Dell, HTC, LG and Samsung.

Copyright © 2010 IDG Communications, Inc.

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