How Low Can WinMo Go?

Microsoft has made a massive gamble with their new Windows Phone Series 7 gambit.  The gamble will determine whether Microsoft will be a relevant player in mobile devices for this new decade.

As mentioned by Engadget right after the announcement, WPS7 (which is just dying for an O between P/S, does MS really have to make things this easy) has effectively cut off sales for the next 8 months of any WinMo 6.5+ device. Why would anyone buy a device that they know won’t be supported by the new operating system? The Q1/Q2/Q3 sales for those devices are going to be awful.

Gartner’s release of recent 2009  numbers really show why MS had to make this gamble.

(content from MacRumors)

Worldwide Smartphone Sales in 2009 in Thousands of Units (Source: Gartner)

In a market that increased by 30 million units during a global recession, WinMo not only lost market share, but lost sales. Apple doubled their sales, Android increased by a factor of 10, and RIM even managed to increase both market share and sales. The only Smartphone company in more trouble than Microsoft is Palm with their new Web OS devices garnering a lowly 1.1 million units. This compares to nearly 2.5 million units in 2008 of their legacy Palm OS devices. Palm in essence last year did what Microsoft did this year. Launch a brand new OS without any ties to the old OS, kneecap your existing hardware in the channel. Now Palm lost 50% of their sales and that was a January announcement and a June Shipment. The gap for Microsoft will be even longer, and any delays that limit Q4 sales would be deadly. Of course, WPS7 phones will be on multiple vendors, but almost every vendor will be dividing their attention between WPS7 and another OS (HTC- Android/WPS7), Samsung (Bada/WPS7), Sony Ericcson (Android/WPS7).

So how low can WinMo drop before WPS 7 arrives? I think a 50% drop similiar to Palm is possible with MS dropping down to approximately 8 million total units for 2010. It’s easy to  imagine the Smartphone market growing to 200 million units in 2010, so MS with only 8 million units would have seen their market share halved in 2010. There was no other choice but so much is riding on WPS7 in 2011. Microsoft will potentially be looking at 4% market share going into 2011 forcing MS to be in the underdog role that they have not excelled at to date (Zune, search).

What are the potential reasons for such a drop? There are doubtless a number of new Android devices on the way (Motorola Devour for instance) which will have a similar form factor to the new WPS7 phones, both touchscreen only and keyboard sliders. Apple will release a new iPhone in June/July. RIM will clearly attack WinMo in the enterprise space as the new OS will take a while before being certified by IT departments. Palm should really try advantage of this gap and release some new hardware as well. There were clear signs at Mobile World Congress that Nokia appears to have awoken from their 2.5 year slumber  of not answering the challenge of the iPhone, although their multi OS strategy is still a mess. Nokia’s Symbian based smartphones, in a smartphone market that has grown nearly 50% in two years, has dropped 17 market share points. Nokia needs to start rolling back the gains of Apple/RIM/Google but could hurt Microsoft as well.

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