Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

What Palm's Failure Means for Windows Phone 7


Microsoft is entering a very crowded market with a mediocre product.

Palm (PALM) is taking a serious beating today, trading down about 20% after delivering a fourth-quarter revenue outlook that is less than half Wall Street's expectations.

The problem is simple. The company's sales channels are packed tighter than a sardine can and that means orders aren't coming in fast enough. Note to self: Next time pay closer attention to two-for-one deals on hot phones.

A major theme I've been harping on is the overcrowding of the smartphone market. In How to Kill the iPhone, I noted that "consumers are being overloaded with too many companies making too many smartphones running too many operating systems with too many features that nobody cares about." It's not that the phones are necessarily bad, it's just that so few of them stand out in any meaningful way.

Currently, there are three major players in the smartphone OS area -- Research In Motion's (RIMM) BlackBerry, Google's (GOOG) Android, and of course, the Apple (AAPL) iPhone. According to Gartner, all three gained market share in 2009 at the expense of Symbian and Microsoft's (MSFT) old Windows Mobile.

This market will only get more overloaded when Microsoft rolls out its Windows Phone 7 mobile operating system later this year.

Windows Phone 7 actually looks pretty good, and the early takes from the tech media world have been fairly positive outside of grumbling over minor features.

But can it avoid Palm's fate?

Let's take a look at Microsoft's hardware partners. Dell (DELL), Garmin-Asus, HTC Corp, Hewlett-Packard (HPQ), LG, Samsung, Sony Ericsson, Toshiba, and Qualcomm (QCOM) will produce Windows Phone 7 devices. These are all inexperienced and/or commodity players in the smartphone market, and none of them made any great models with Windows Mobile.

The result will be dozens and dozens of look-alike models that can't hold their price points. Expect lots of two-for-one deals on WP7 phones in early 2011.

Secondly, the iPhone is likely to receive a makeover this summer. From 2007 through 2009, a new iPhone model was released during the summer months. As we've seen with the iPad, every Apple product becomes the talk of the town instantly -- the best free marketing in the world.

And finally, I believe there is way too much legacy Microsoft influence involved in its Windows Phone 7 strategy. How else can you explain every WP7 phone having a Bing button for search? And more importantly, why is Microsoft even using the baggage-laden Windows name in the first place? Windows Mobile was clunky and boring -- why remind us of it?

Throw in "Xbox Live games and the Zune music and video experience" and I wonder -- is the primary focus here to make great mobile phone software? Or to simply push the mixed batch of Microsoft brands?

Even so, Microsoft has way too much money and marketing muscle to go the way of Palm. If they want shelf space and marketing support, they'll get it. From what we've seen with the Xbox, Microsoft isn't afraid to lose money to build a business and that's going to help the launch big time.

So expect Windows Phone 7 to impact Android and BlackBerry, but Microsoft's commodity approach to the market will keep it far from Apple iPhone's pedestal.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos