Microsoft's mobile effort: back to the future?

Windows Phone 7 launched on 10 devices over 60 carriers in over 30 countries with 1.5 million of channel inventory in 6 weeks. Given the breadth of distribution, that number is not huge, amounting to less than 10k phones per operator.

Curiously, Windows Mobile was still selling in significant volumes last quarter. Maybe even higher than WP7 is selling now. In Q3 2009 Canalys reported 3.6 million WinMo units sold. In Q3 2010  Gartner estimated 2.3 million were sold through to end users. Even nine months ago Windows Mobile was running at 3.7 million units or over 1.8 million every six weeks.

Microsoft also announced they have 18,000 developers with 4,000 apps on the WP7 marketplace. That’s one developer for every 83 devices in inventory.

Microsoft’s Achim Berg:

our numbers are similar to the performance of other first generation mobile platforms…

We’re comfortable with where we are, and we are here for the long run; Windows Phone 7 is just the beginning.

In terms of first generation platforms, I assume he is referring to Android and iPhone. That claim of similar volume growth is perhaps a bit too optimistic. However, he’s very wrong about WP7 being the beginning for Microsoft’s efforts in mobile. Not even close.

Microsoft has had mobile software products in the market for over a decade. In 2003 Gartner declared that Microsoft would sweep Symbian aside. In 2006 they were the odds-on favorites to win the mobile platform game on the basis of developer support.

Microsoft’s Windows Mobile was selling more in 2003 than Microsoft’s Windows Phone is selling in 2010. At the time, Microsoft also boasted of having a huge developer base (larger, in fact, than the number of users of the product; their .NET developer base being counted as mobile developers.)

Furthermore, prior to the launch of iPhone’s App Store, Microsoft spokespersons scoffed at the idea that Apple could field a catalog larger than Windows Mobile which led with over 13,000 apps in August of 2008.

Dragging out these old figures isn’t meant to deride Microsoft. They were not alone in failing to capitalize on early leads in mobile. Palm, Nokia, DoCoMo and Qualcomm all failed. RIM is arguably failing as we speak. Some have argued that Apple is also about to be undone by Android.

The point is that dramatic, violent change was possible even five years after foothold markets were established.

The question for today is: Is it still possible? Can a new platform still gain traction?

Microsoft is clearly betting that it can. Their seemingly quixotic attack on the market can only be justified on the basis that it’s still early days. They must reason that un-penetrated markets are huge and that the existing platforms are not sticky enough to prevent switching.

At least one analyst agrees. IDC made the forecast that 32 million “Windows Mobile/Phone” devices will sell during all of 2011. I took issue with those forecasts at the time but if they deliver that volume they will get around 10% share, enough to stay on the map. If they don’t then Microsoft will look more like Mobile Zune than Mobile Windows. The stakes are high.

So even though they may have airbrushed Windows Mobile from history, Microsoft’s current strategy is a direct consequence of them having failed with a seemingly strong platform.

  • You write:
    "Microsoft’s Windows Mobile was selling more in 2003 than Microsoft’s Windows Phone is selling in 2010."

    Ouch! Such an indictment of failed mobile efforts.

    While I do not think Windows Phone will unseat Android (or iOS or Blackberry), they can simply because these are early days. Soon, we will hit 1 billion smartphones, then two billion, then three billion. This market is still wide open imho.

  • jjj

    "Is it still possible? Can a new platform still gain traction?"

    In a value chain where the carrier has so much influence, anything is possible.

  • r.d

    Only way Microsoft can win is through patent litigation and
    acquisition. Microsoft can't use commodity hardware
    to get all the profit. So they are utterly lost.
    The fact that they are porting Windows 8 to ARM
    shows that they have no vision just hoping their
    OEMs can use to create something that people
    will line up around the block.
    Intel is in the same conundrum.

  • Steven Noyes

    "The question for today is: Is it still possible? Can a new platform still gain traction?"

    I think the answer is yes. I was really impressed with WP7 and this is a unique thing for me to say about a UI from MS. They got lots of things right with WP7 and I already have 3 acquaintances that lost their stickiness to Android to do the WP7 thing. They are very happy with the switch.

    In 2 cases, the two were also Zune owners and really liked the Zune Market. They also needed better Exchange integration that was better than what Android offered. They got both with WP7.

    While the Zune has not been a great seller, it still captured 4-6% of the market and I suspect many Android users will transition from Android (because we know a Zune owner would never buy an iPhone) to WP7 at the first opportunity.

    The other person switched for the XBox Live integration. Again, this is an "eco-system" thing. Apple has leveraged the iPod eco-system to great advantage with the iPhone and I am seeing MS leveraging their (somewhat weaker) eco-system with:

    Zune Market
    XBox Live
    MS Office

    I think this will provide an important incentive for many people to try WP7 in the coming months.

    • CndnRschr

      Maybe – but this will be an incentive for 4-6% of the market – at most. That is hardly the market Microsoft needs to ensure its business model succeeds. WP7 may carve a niche from Android owners who actually want to pay for content and apps because they're tired of advertizing. But many Android owner also like the openness of the system (which is why they are not RIM or iOS users) and its hard to see how Microsoft can fool anyone into thinking their ecosystem is as open as Android. Exchange support on WP7 may be class-leading, but its support in iOS and Blackberry is practically as good. Ditto for MS Office. Xbox Live and Zune are true levers but are these enough?

      • Steven Noyes

        That covers the Zune eco-system. 4-6%.

        What about XBox Live integration? What? Another 7-10%?

        What about Office? Perhaps another 5-10% and from a different demographic than the XBox Live demographic.

        What about outstanding Exchange integration? Is that worth 5-10%?

        And all those .NET developers with their C#? They have to be worth something due to their ability to create value for others.

        I see these as real selling points that sales reps can use to push the value position of WP7 over competing platforms even when laid out side by side. As for "openness". I think the ones that really care about that is a much smaller percentage than the Zune crowd. Otherwise, Linux would have ruled the world. Android has done as well as it has because the iPhone had no competition and it filled a vacuum.

        Add it all up, and I could see MS ending up with 20-30% of the market. Apple with 10-15% (remember, they were hoping for 1-2%). Nokia with 15-20%. Android with 25-35%. Others another 10-20%. Oh, and Apple with 60+% of the profits.

        I do not see the mobile industry going to a single unified OS like the desktop. Part of this is because the actual real cost of switching is relatively low compared to the desktop. Likewise, phones are a more personal choice. I really like the iOS paradigm. I have friends that don't. But I have a strong Apple eco system in my house. I like being able to control my stereo from multiple devices laying around. Airplay is cool. But only if you buy into the Apple eco-system.

        There are people that buy into the Google eco-system but their eco-system easily translates to multiple devices. It diminishes the "stickyness" of Android.

      • CndnRschr

        All that assumes no overlap between Zune and Xbox owners (moreover Zune is essentially US only). It also assumes that people are unhappy with the Exchange integration in Blackberry and iPhone (which is pretty good). I agree that the phone OS market will not be dominated by one or two players. That counts against Microsoft in a big way (and to some degree Google).

        My long term marketshare (profitshare) estimates among the big 5 smartphone OS's are:
        MS 15% (7%); Google 35% (22%); RIM 7% (7%), Apple 17% (51%); Nokia 25% (12%).

        But any predictions of the future are for fun only….. 🙂

    • chano

      I like the idea of MS competing. But they cannot reach a critical mass today. They will still sell millions of phones, but they fiddled too long while Rome burned. If you think half the world will buy a smartphone, I find that a leap too far. But whatever happens, there is only a little credibility to be won for MS here. No profit.
      I wish them well, but let's see how this unfolds. I think MS missed the boat, but I could be wrong. They may just gain a toe-hold on it – say 1-2% of shipments and 0.1% of profits.

  • Joe_Winfield_IL

    I'm struggling to see where the carriers would choose to promote the WP7 devices above anything else.

    In unsubsidized markets, the carriers are much less invested in the device than in the user. For these markets, I would think the incentive is to sell users the device that will retain their business. Nothing about WP7 seems uniquely able to provide thorough customer satisfaction. iPhone is the leader in user satisfaction and customer retention, with WP7 likely bringing up the rear.

    In subsidized areas, device profits/costs are much more of a factor to carriers. The retail price for all smartphones will be between $0 and $200, but the carrier's device cost is not transparent to the users. In these markets, I think the carriers' natural inclination is to promote the devices with the lowest subsidy, in order to maximize GP over the life of a contract. Android wins here, with WP7 in a crowded pack and iPhone bringing up the rear.

    I don't see how Microsoft can make their devices uniquely attractive, short of strong direct incentives to resellers. Even then, they have a hurdle to climb with user perception. Shelf space is limited at small stores and kiosks, and WP7 won't get the type of billing that the big guys get today unless the devices start to sell like crazy. This is a Catch-22 for MS, as they won't sell until given significant promotion, attention, and placement by retailers.

    • CndnRschr

      They are promoting like crazy but marketing might is not so effective in a market where the early adopters are relatively sophisticated and most people are limited by existing contracts. The buzz around WP7 is muffled by the fact that it was launched in a relative hurry (two years of lead time is a hurry) and lacks features many consider basic for a smartphone. Moreover, the hardware is virtually a commodity. That is MS model, of course but it is harmed by a lack of device integration and the sheer competitiveness of Android. Microsoft will invest their last dollar into smartphones – the company is not stupid – this market is essential for the future in which mobile devices will be the primary interface for information. So they are in it for the long haul. But so is Google, RIM, Nokia and Apple. In that market, their traditional an enormously profitable licensing model is actually a hindrance.

      • Joe_Winfield_IL

        I know MS is doing all they can, which is a lot. My contention is that the promotion isn't at the point of purchase. Some customers may walk into a store after seeing a commercial and want to buy. But most customers are going to have a discussion with the sales rep about pros and cons of different devices, try to work down the price based on contract timing, physically hold and compare phones, etc.

        My point is that during this part of the process, WP7 won't get a strong pitch from the retail sales rep. There isn't a standout feature that the rep can stand behind as the compelling reason to choose WP7 over the 4 established incumbents (iPhone, Android, BB, Nokia), and just as importantly the sales rep probably doesn't have a special incentive to sell specifically WP7 phones.

      • CndnRschr

        I agree – that is a big differentiator of the AppleStore, for example (and a likely reason for the nascent Microsoft efforts in retail). Another problem is that the Metro UI needs to be personalised to show its true colours. This is both a strength and a weakness. The generic interface shown in stores is lacklustre. The best sales pitch would be from a current owner and that relies on word of mouth which, when you are a newcomer, means slow, organic growth until at some point you hit critical mass. Are there that many disaffected Android and iPhone users? I doubt it. Sure, there are 3 billion potential new customers but we're back to the credible competition problem.

        My bet is that Microsoft is already pushing out incentives to retailers to spur sales so that the sales people do try harder. But the product is the product….

      • asymco

        The biggest problem with WP7's potential is that although Microsoft rightly considers the market to be largely un-penetrated, their products are designed to compete with existing smartphone users. The way to go after smartphone non-consumption is by having a simple UI for average users not a customizable, avatar-themed, high spec, early adopter aesthetic. I can't help thinking that the Kin was really the product aimed at the non-consumptive low end.

        Where is WP7 in the emerging markets where Android is catching on? Why did WP7 launch head-to-head vs. iPhone and Android and RIM? This is not an asymmetric competitive approach.

      • asymco

        I'd like to hear more how Microsoft is promoting the product. The budget is reported to be $500 million for WP7 promotion. This is higher than what Apple spends on all its ad budget every year. I wonder how much they will spend on incentives for reps. You seem to say that they aren't spending on reps. Is this confirmed?

      • Joe_Winfield_IL

        I have no knowledge of Microsoft's spending. I should not have used such a confident assertive tone. The bulk of the $500 million may be behind the scenes and directed at incentives. However, even in this case, the spend would probably be between MS and the carrier. The carrier would still need to directly pass this on to the sales floor, so the incentive would be derivative rather than direct.

        While Microsoft certainly has plenty of cash to deploy, they won't spend just for the sake of spending. If the marketing campaign is ineffective, I don't know what the next step would be. I agree with you that it was an odd choice to compete primarily in the US against the other US manufacturers with high end devices that look like Android hardware. It would seem that inexpensive devices in less developed markets would have afforded Microsoft the opportunity to sell large numbers of devices, then use the new scale to compete more effectively.

        Ultimately, I feel like WP7 was 12 months late. The Motorola Droid series let the Android genie out of the bottle (at least here in the US), and now the law inertia is in effect. Android will stay in motion until an unforeseen disruption occurs, and WP7 is neither unforeseen nor disruptive.

  • timnash

    There are too many unanswered questions to write off WP7 now.
    Will the lack of a large patent portfolio make the cost of licensing patents + litigation too much for many Android manufacturers? If HTC loses badly to Apple, that is effectively can not sell Android phones in North America, then more of the manufacturers will look to Microsoft to protect them. Few of the Android manufacturers are making sufficiently good profits to want to risk substantial settlement costs – they simply want to keep their place in the market and make a profit.

    Will a Verizon iPhone cut into the Android market enough, so US developers stop bothering with that market? If WP7 establishes a good market for buying apps and in app purchases, the revenue from these could outweigh Android's largely ad funded model, in the same way that developers make more money through Apple's App store + ads.

    To what extent will businesses and government accept Android? While iOS is establishing itself and RIM is transitioning to a new OS, there is certainly an opportunity for WP7 among the IT departments that are Microsoft's strongest backers. Although MS only sold 18% of Windows Mobile into that market that was about 3.5 million phones a year, a couple of years ago.

    Most manufacturers need a third party OS. For now Android keeps them in the market but, looking an the initial WP7 phones, many are hedging their bets.

    • CndnRschr

      Betting on your success through the failure of Android is probably not a good strategy for Microsoft. It's interesting that the Redmond mock funeral was aimed at Apple and RIM, not Google yet Google has the business plan most similar to Microsoft (via licensing and lack of integral control over hardware unlike Apple, RIM and Nokia). The device OEMs are the one's hedging their bets between Google and MS. It's their only way to compete with the vertically integrated companies. These guys must be upset with Google over its apparent lag in getting a tablet-ready version of Android out. But Microsoft has been pushing Windows 7 as their tablet solution (now to be ported to ARM). In this light, it's perhaps understandable why RIM bought QNX to get to market before all the horses had bolted. HP is clearly now tethering its tablet dreams to WebOS. That is, two more vertically integrated solutions for tablets. Meanwhile, the Samsungs, HTCs, Sony's and Dells of the world are being bounced around reacting to the market instead of driving it. I doubt Microsoft will provide their panacea but it might keep Google engaged.

      • asymco

        Android was begun as an effort to blunt the success of Windows Mobile. Windows Mobile failed due to inherent design flaws. Android changed to become an effort to blunt the success of iPhone but preserved the position in the value chain vacated by Windows Mobile. Windows Phone was patterned after the iPhone to a large degree but maintained the old business model of Windows Mobile. Both WP7 and Android have the same constraints to market access: device OEMs. The big difference is that WP7 is more specifically suited to the larger branded vendors while Android is more attractive to the smaller unbranded vendors. The bet between WP7 and Android is whether the low cost vendors are likely to win or not.

      • Joe_Winfield_IL

        If, as rumored, Nokia and Microsoft are truly climbing into bed together, it changes everything. But if not, why do you suggest that the high end manufacturers will choose WP7 over Android? It doesn't need to be binary for the likes of Samsung and HTC, and their Android devices have done very well in the last year.

  • Davel

    A friend of mine who historically likes win phones said some nice things about win7.

    I agree that although Microsoft wants to claim reboot, they have a long history and the consumer will not think this is a new product line.

    Microsoft still has a chance. They will have to do what they did in gaming, lose money and stay in the game. Unfortunately Microsoft makes money from OS and office. How does win7 fit in their strategy?

    I wonder if long term android will beat apple. Google will need to maintain focus on the phone space. Apple is focused. Will google do the same? They care about advertising and search. Android by itself makes no money.

    • CndnRschr

      Depends how you define "beat". Apple will continue to make most of the money in this space – its simply unbelievable how they've managed to cream the profits in such a short time – they don't care so much about market share as long as they have mind and profit share. Android will likely take the middle and lower ends but make a chunk of money via advertising (their core profit center). Microsoft will throw gobs of money into WP7 as leaving this market would be akin to burning their seed corn. Yes, they have a chance – a good chance. But if people think WP7 is going to achieve anything like the dominant share of the market and profits that Windows enjoys, they've got a long wait.

      • FalKirk

        "(Apple) don't care so much about market share as long as they have mind and profit share."

        I disagree. Just because Apple was unable to gain market share in the personal computing space does not mean that they didn't want it. They just knew better than to prioritize market share over profit share. If you want to see how Apple really feels about market share, take a look at the history of the iPod. Apple went in at the high end. Once they dominated there, they moved into the middle and finally the low range devices – all the while maintaining their profit margins.

        There are a variety of reasons why the phone market is different than the iPod market was. But one of the things that is the same was that Apple's integrated iPod was going up against cheaper, licensed MP3 players. Cheap doesn't always win when it comes to market share. And Apple cares a great deal about market share. The iPod proves it.

      • CndnRschr

        OK, put it this way, Apple's behavior suggests the company preserves profit share over market share. There is no sign (yet) of any willingness by Apple to reduce iPhone prices to the levels already seen with WP7, not to mention Blackberry and Android. Likewise in the PC market where Apple has retained margins and profits while only slowly growing share. The iPad is a difficult one to call. They came in aggressively on price to begin with (a major reason the competitors were caught off-balance). They own 90+% of that market but we are unlikely to see heavy discounting on iPad as the competition ramps up. Apple thinks they have a superior, winning product that people want to buy. Whether that holds throughout the next couple of years will be interesting to follow.

      • davel

        I agree on all counts

      • davel

        I agree with you. Apple cares about margin and quality products.

        The big difference between phone and mp3 is that with the singular exception of the touch there is no OS in the mp3 space. The phone is very much about the software. Google is a software company and so can and has shown an ability to compete there.

        The question is what Google cares about. With the Nexus it seems that Google has not quite given up on designs in hardware. Will their focus change? Will they want to compete in phones or do they only care about search?

  • O.C.

    I don't understand how people can say that new entry's in the smartphone OS market don't stand a chance.

    Most people don't even own a smartphone, so there is plenty of room to grow. When iOS and Android entered the market they were the "new kid on the block" in a existing market, but look at them now. So if they did it why is it so hard to belief others won't be able to follow.

    The same goes for Nokia when people claim they are dead in the water and won't or can't recover.

    I just read he other day

  • MattF

    I think Microsoft is trying to build a little ecosystem that plays to its strengths– Win7, Win mobile, Zune, Xbox, Exchange, and .Net. It's a plausible long-term strategy, and most of the pieces are in place.

    It would be a reasonable option for people who, for one reason or another, don't want to drink the Apple Kool-Aid (and I speak here as an Apple fan), but do want a level of integration that Android can't manage.

  • CndnRschr

    You have to feel a little for Microsoft. They were the dominant software powerhouse for 20 years and in the PC arena are still raking in the dough. But they completely blew the mobile opportunity by expecting that people who used Windows would simply want to extend their desktop metaphor (and software) to their phones. First RIM ate into their lunch by offering an efficient mobile solution for email in a highly secure and effective manner. Then Apple pushed out a paradigm shift by actually making a mobile device capable of being a first class Internet citizen (and easy to use to boot). Google then stole Microsofts business modus operandi by licensing a pretty good solution that rapidly evolved into a very good solution and topped Microsoft by not charging the OEMs a license fee. Who knows what the management at Microsoft were thinking (their programmers are equal to anyone) but clearly they knew that their existing strategy was bombing.

    The reboot that is Windows Phone 7 is perhaps more accurately a hybrid but that's OK. The Metro UI is new and not simply a rehash of existing UIs. The software is still rough around the edges (especially in usability) but Microsoft has never been good at getting stuff right first time. It's an iterative company (just like Apple). But over the past two years, Android has come from nowhere and in the market is the head-to-head comparator with WP7. iPhone is in a class of its own and, at least currently, enjoys the gestalt of being the one to beat. Nokia continues to miss the target and HP has effectively killed the WebOS phone devices (without bothering to stage its own funeral). RIM is pulling out the stops and at least trying. It's the wild west and innovation is accelerating. Microsoft knows that it must hang in there, regardless. It's got deep pockets and at least some of the competitors will either implode or become targets for acquisition. Waiting in the wings is not what Microsoft wants to do but its proven it has the patience as shown by Xbox. Will it pay off? I'd argue that if they are happy with the relative success of Xbox, yes. But Xbox is no Windows/Office money printing device.

    Apple and Google are the usurpers in this market. They came from nowhere and redefined the rules. The incumbents are still reeling (but not out).

    • asymco

      Does anyone else notice that when assessing Microsoft's prospects in a market their deep pockets are often cited but when Apple's are considered, their pockets (which are even deeper) aren't?

      • CndnRschr

        Because Microsoft relies on its deep pockets to bailout its new ventures as the ROI is over a long perod. Apple seems to achieve a much shorter ROI. I'd bet the iPad has pretty much paid for its development already, the iPhone took probably a couple of years… Microsoft is replying on its past success, Apple on its future success.

      • Joe_Winfield_IL

        I know! It drives me nuts. I think it is because Microsoft seems to have turned a corner in its life cycle. Gone are the heady growth days. Now the typical MSFT owner is the dreaded "value" or "income" minded investor. The same seems to have happened to Cisco and Oracle. These companies are all massive, they all generate double digit annual growth, and they all dominate their respective sectors. But they are all primarily focused on using their considerable resources and cash generation to maintain the status quo. They deploy cash to buy upstarts, not just for their potential, but to prevent future competition.

        Apple maintains its independence, and does not participate in this type of spending. I think Apple could get to $100B and investors would still talk about Microsoft's ability to spend as a strength over Apple, rather than discuss Apple's ROI as a unique strength among all technology companies. They wring so much profit from so little R&D spend, yet all their products are unique and proprietary. Their media buying seems equally savvy, especially when compared to MS.

  • famousringo

    My main concern with Microsoft is that they have a hard time generating substantial profits in markets where they don't enjoy monopolistic control. There are a lot of other companies that are quite content to serve a niche with specific demands an make a healthy return on their piece of the pie, but MS always feels it has to go for the whole enchilada, and spares little expense in the pursuit of it.

    So even if WinPho7 carves out a 20-30% chunk of the smartphone market, is that going to be enough to generate substantial profits, or will MS burn all their phone money and then some to earn that stake? Xbox enjoys a similar slice of the game console market, and that project still has a long way to go before it pays for itself.

    • gctwnl

      What are the numbers on XBox?

      • CndnRschr

        Great charts on all games systems sales here:

        Xbox360 has sold 48 million units in total (11 million this year). Its about 4 million ahead of PS3 and 33 million behind Wii. The PSP has sold 64 million to date.

        As shown in the Xbox360 arena, Microsoft is willing to hang in for the longer term. This is all predicated on the Windows/Office cash cows (which don't really show much signs of fatigue).

      • famousringo

        VGChartz is pretty much the best source for free financial and sales data on the gaming market. Here's an old (and somewhat broken) post on what Xbox has cost Microsoft:

        The numbers are from financial statements, but take them with a grain of salt. Xbox financials get lumped in with a variety of other MS products, such as PC peripherals, Mac Office, and Zune. It's hard to know if all these products have offset Xbox losses, or if they've made them look worse than they actually are.

        With that in mind, the bottom line is that the Xbox as of 2008 has cost Microsoft a cumulative $9 billion, and though it has been in the black for the past couple of years, it has a very long way to go before it can be said to have been a worthwhile investment.

      • asymco

        I am very skeptical that Microsoft will ever get a return on XBox. Chances are that the lifespan of the console market is not long enough to see a return on $9 billion invested (plus some time cost of that capital).

  • How much does the establishment of a market paradigm depend upon the public consciousness and public expectation of what a particular class of products do?

    And how does that limit new entrants?

    This article's point is that Microsoft was one of the successful entrants in the old paradigm of mobile devices, but they were disrupted [perhaps the most] by the current move toward holistic consumer electronic mobile user experiences with easy application distribution (this classifies Apple and Google).

    RIM is the last holdout of the old mobile market – single-purpose device with no real modular software capability [App World regardless].

    But, just like Apple could only enter the mobile market by disrupting the old paradigm, is there really enough room for new entrants into the current mobile market aspiring for anything greater than a 5% share? Or has the public already gained enough awareness of what product lines are available, and will see no benefit in a new line (Windows Phone) that does the same thing, unless another disruption takes place?

    For example, I consider both Windows Phone and Palm's fledging rebooted HP/WebOS to be at roughly equivalently positions in terms of product maturity. I would expect them to both share the same fate. For Windows Phone to succeed but WebOS to fail [assuming HP and Microsoft have equivalently well-planned market strategies] would confirm my thought above — that consumers, once a market is established, don't easily accept new entrants unless further disruption occurs.

    For reference, see the iPod market — an easily equivalent product [Zune] has near no impact on the distribution of share among consumers, because the paradigm was conquered early by iPod, and Zune has not disrupted the iPod's success, merely confirmed it.

  • gctwnl

    @judsontwit: yes, this is a nice way of describing the situation. But sometimes a shift can happen without a paradigm shift. E.g. WordPerfect replaced by Word (by the force of the Windows monopoly, though). In very mature products' markets, fashion also plays a strong role.

    Apple may have competition in smart phones within the new paradigm, but the situation at mobile 'players' (Nintendo DS, PSP, iPod Touch) is different. There is no Android-based 'iPhone Touch' yet as all the Android players are smartphone builders. Microsoft has a possibility here. And Apple's situation of being strong in both usage areas and leveraging one platform over both is a very strong one.

    • gctwnl

      I meant 'iPod Touch' of course and not 'iPhone Touch'

  • gctwnl

    I meant 'iPod Touch' of course and not 'iPhone Touch'

  • 21tiger

    "My main concern with Microsoft is that they have a hard time generating substantial profits in markets where they don't enjoy monopolistic control"

    Ding ding ding ding ding ding!! Couldn't have said it better.