Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Ever since Palm (Nasdaq: PALM ) caught the company off-guard more than a decade ago with its popular PDAs running Palm OS, it's been a cliche to talk about how Microsoft (Nasdaq: MSFT ) needs to revamp its "wireless strategy." And in the ensuing years, we've seen Bill Gates & Co. respond by trotting out one awkward, slightly buggy PDA/smartphone operating system after another. While the names of the operating systems have changed, they've all been duds in terms of appealing to consumers on a large scale.
For a short while during the middle of the decade, it did look as if Microsoft might become a success in the smartphone space, as Windows Mobile, in spite of its flaws, gained market share at the expense of the outdated Palm OS. But then came the runaway success of Research In Motion's (Nasdaq: RIMM ) BlackBerries, which, with their legions of email addicts, quickly became the world's leading corporate smartphone platform. And after that, of course, came Apple's (Nasdaq: AAPL ) iPhone, and Microsoft's official designation as a smartphone also-ran.
But even for an also-ran, things have gotten pretty ugly for Windows Mobile as of late. Gartner recently estimated that while global smartphone shipments grew by 13% annually in the third quarter, Windows Mobile shipments declined by 20%. That brought Windows Mobile's smartphone market share down from 11.1% to 7.9%. All the while, RIM and Apple's shares grew to 20.8% and 17.1%, respectively. And even worse, it doesn't look as if Microsoft is doing much to halt the free-fall.
Microsoft, of course, will flatly deny this. The company will point to the recent release of Windows Mobile 6.5, which improves upon the operating system's clunky user interface. But the interface still pales in comparison to the ones developed by Apple, RIM, and Google (Nasdaq: GOOG ) for their smartphone platforms. Which helps explain why HTC, the world's largest Windows Mobile smartphone maker (these days, a distinction on part with being the world's largest VCR manufacturer), continues to rely on its proprietary TouchFLO interface instead. You'd think that the world's biggest software company could do better.
Likewise, you'd expect the world's biggest software company to develop a better Web browser for its smartphone OS than Pocket Internet Explorer, whose shortcomings have led HTC to ship devices with a third-party browser from Opera. And you'd expect it to develop a better media player than Windows Media Player Mobile, whose capabilities are easily outclassed by third-party apps such as CorePlayer. That is, unless the company decided that it's not worth investing the resources needed to become competitive.
On one level, I think this attitude from Microsoft is understandable. For a company that reported over $58 billion in revenues during its last fiscal year, the licensing fees it gets from Windows Mobile must feel like chump change. But with consumers increasingly using their phones to do things that they once only did on their PCs, being a nobody in the smartphone world can't be good over the long haul for Microsoft's brand and mindshare -- especially with its biggest PC industry competitor, Apple, also being a smartphone leader.
Microsoft is probably aware of all this, hence its rumored interest in buying RIM. But unless RIM's price tag comes down considerably, that move seems pretty unlikely. Which means that we can expect little more from Microsoft in the smartphone world than some half-hearted software "upgrades," and more exasperated comments from Steve Ballmer in which he wonders how it all went wrong.