Microsoft Muted, Not Maimed, by Apple

While the tech industry was all atwitter over Apple Inc. (Nasdaq: AAPL)'s Worldwide Developer's Conference yesterday, Microsoft Corp. (Nasdaq: MSFT) has been quietly holding its own developers' TechEd event in New Orleans.

This won't be the last time that Apple messes with Microsoft's plans either. Its entire road ahead just got tougher, thanks to Apple's next iconic device. Microsoft is counting on its upcoming Windows Phone 7 (WP7) to help it stave off the competition, but it has yet to release any devices to prove it's capable of doing so. (See Apple Unveils the iPhone 4.)

"We're driving forward in the phone business, but this is a very dynamic business, the market leaders here have shifted over twice in the past few years... So we've got to have real ideas and we've got to execute consistently," Microsoft CEO Steve Ballmer admitted at the recent D8 Conference.

Yet while Ballmer's been busy talking about its complete mobile reboot, Google (Nasdaq: GOOG), Apple, and others have been unveiling actual handsets. In the first quarter of the year, Windows Mobile came in fifth in terms of operating-system market share, behind Symbian Ltd. , BlackBerry , iPhone, and Android. It is foreseeable that Microsoft's market share will continue to fall until the company introduces its first WP7 handsets, slated for the holiday season, and the new-and-improved iPhone won't help its case. (See Gartner: RIM, Android See Boosts in Q1.)

Luckily for Microsoft, it's a company that thrives under pressure, according to Michael Gartenberg, a partner at research firm Altimeter Group . There's room for Microsoft, Apple, and a host of other handset makers in the market, he says. There may be a lot riding on the launch of WP7, but Microsoft is well-equipped to compete.

"For anyone discounting Microsoft's mobile efforts or thinking they will get out of the space or not continue to play in it, you underestimate Microsoft and Microsoft's resources at your own peril," Gartenberg says.

Microsoft's best resource is its developer community, he adds, quoting Ballmer's mantra of "developers, developers, developers." The company has always put a lot of effort into developer evangelism, which will be even more important for WP7.

Microsoft has made several promises to developers this week at TechEd already, although most were lost in the Apple news cycle. This included that they are no longer limited to five paid app submissions per year under their $99 annual fee. Now they can submit unlimited apps -- if they are paid. Free apps will still be limited to 5 per year with a $19.99 charge for each additional app.

Microsoft also let developers know that development hardware, unlocked devices for developers to test their apps on, will be available "very soon."

Microsoft's other resources include that it has its own media and content store, Marketplace, to rival iTunes, tight integration with Exchange and its suite of Office products, and a strong enterprise appeal working in its favor. To bridge the gap to the large consumer audience, the vendor has suggested it will also meld its recently released Kin 1 and 2 handset features, including social network aggregation, with WP7 in the future. (See Has Microsoft Missed Its Mobile Moment? and Microsoft Has Two New Kin.)

Among Microsoft's planned WP7 devices is the Dell Technologies (Nasdaq: DELL) Lightning, which features a larger display, limited support for multitasking and potentially the ability to tap long-term evolution networks. Microsoft partners High Tech Computer Corp. (HTC) (Taiwan: 2498) and LG Electronics Inc. (London: LGLD; Korea: 6657.KS) have also both promised WP7 smartphones before the year's end. (See LTE Watch: Dell to Intro '4G' Phone?)



One of the most interesting announcement to come out of Apple CEO Steve Jobs keynote yesterday actually supports Microsoft's competitive positioning against Apple, but reinforces it has bigger fish to fry. Jobs said that Microsoft's Bing search engine would officially be part of the iPhone ecosystem. In Gartenberg's opinion, this means that Apple doesn't view Microsoft as the monster competitor in the space right now -- an opinion that Microsoft likely shares as Android encroaches on both.

"This will be a real hugely competitive space because you have such strong players involved," Gartenberg says. "HP Inc. (NYSE: HPQ), Google, Microsoft, Apple, Nokia Corp. (NYSE: NOK), RIM -- all competing with different business models, but for the same market space. Only a few can survive long term. In order to do that, they have to play the game."

— Sarah Reedy, Senior Reporter, Light Reading Mobile