Is This Microsoft's Secret Weapon?

Maybe it's not too late for Microsoft (Nasdaq: MSFT  ) to matter in the smartphone space.

Sure, the once-ballyhooed arrival of Windows Phone 7 has apparently denigrated to a mere whimper. Apple (Nasdaq: AAPL  ) owns the premium space. Research In Motion (Nasdaq: RIMM  ) has cornered the corporate realm. Google's (Nasdaq: GOOG  ) open source Android has dibs on everything else.

However, Microsoft's decision to make Xbox Live a key component of its smartphone platform may be a dinner bell to die-hard gamers in the market for a new phone.

Microsoft is announcing dozens of titles that will be available during the fall launch, and -- pardon my choice of words -- but Mr. Softy isn't simply phoning it in. We're talking about entries from the Xbox-defining Halo franchise and even Activision Blizzard's (Nasdaq: ATVI  ) Guitar Hero 5.

No one is going to catch Apple's App Store for now, but can Microsoft prove that quality can trump quantity -- if, in fact, Microsoft is able to deliver a superior gaming experience among smartphones?

One can't underestimate the Xbox community as a shoehorn. When Netflix (Nasdaq: NFLX  ) chose to stream exclusively through Xbox Live, more than a million subscribers activated the feature within a few months -- and this was when streaming through home theaters was still a novel niche in its infancy.

On the other hand, Microsoft's Zune has yet to make a material dent among portable media players despite its link to casual gaming. Even GameStop (NYSE: GME  ) -- an Xbox fan boy hangout if there ever was one -- booted the Zune from its stores two years ago.

Microsoft's real test will come quickly. Once the games are out in the wild, that's when the viral gravy will start to kick in. After all, if crowds begin gathering around the teen playing proprietary Windows Phone 7 games -- and these titles will come, as the software giant has a dedicated team of developers working on this -- more gamers will tire of angry birds or zombie-crushing plants and want a Windows 7 Phone.

Microsoft still has an uphill battle here. It's the price to be paid for arriving unfashionably late. However, it clearly wants to play to win -- in more ways than one.

Does Microsoft's Windows Phone 7 stand a chance? Share your thoughts in the comments box below.

Google and Microsoft are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Apple, Activision Blizzard, and Netflix are Motley Fool Stock Advisor choices. Motley Fool Options has recommended a synthetic long position on Activision Blizzard, writing covered calls on GameStop, and a diagonal call position on Microsoft. The Fool owns shares of Activision Blizzard and Google. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is mildly intrigued by Android and WP7 smartphones, but not enough to loosen his iPhone grip. He does not own shares in any of the stocks in this story, except for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy, and it knows that roaming charges weren't billed in one day.


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  • Report this Comment On August 17, 2010, at 11:26 AM, Thompr97 wrote:

    Of course it's possible for quality can trump quantity!

    But the context is all wrong... Microsoft demonstrates very little quality to trump Apple with.

    Thompson

  • Report this Comment On August 17, 2010, at 11:27 AM, FreeRange1 wrote:

    Oh please, spare us your trite "article". The fact is that the xbox has lost BILLIONS of dollars because MSFT is clueless about the consumer market. And their new mobile OS is DOA for too many reasons to go into here. This company has been ripping off their customers for decades selling them overpriced buggy software and products, and consumers are not about to flock to them when there are so many better alternatives out there. Microsoft is finally getting what's coming to them. Oh sweet revenge. Blue screen, fade out.

  • Report this Comment On August 17, 2010, at 12:42 PM, CPACAPitalist wrote:

    I guess I better put a comment on here so it isn't all Apple loving anti-MSFT people. In the context of the article, when it comes to gaming the Xbox has the corner on serious console gaming, and any semi-serious gamer will tell you so. The best titles, best online services, and most popular enduring games are all xbox centered (yes many are offered on other platforms, but are not as popular). For years many years the gamer demographic has been swept under the rug, but I strongly believe that they(we) will be leading the charge when it comes to spending on items like game enhanced smartphones because you cannot underestimate the willingness of a gamer to fork over cash for whatever is hot. Don't think gamers are serious, go checkout some World of Warcraft freakouts on youtube, now thats a customer base that is dedicated.

  • Report this Comment On August 17, 2010, at 1:56 PM, plange01 wrote:

    if microsoft does have a secret weapon its sure not balmer!!look at this stock!!! what a disgrace!!!!!

  • Report this Comment On August 17, 2010, at 2:13 PM, atassaad wrote:

    I'd say you need to account for reality before you hatch that secret weapon. Our Xbox 360 just died (apparently predictably) in under 2 years under sparse use, of the Red Ring of Death. Now it's up to 3 Xbox, with 2 dead... I'm not inclined to go for a fourth after my son went online and experienced the subculture of Xbox motherboard bakers that are fiddling with what is basically a poor design. And we did open the darn thing... Quality? Let me laugh... Oh but now they're going for the slim Xbox! Try durable first.

    Microsoft should be worried about this mood they created with the purse holder in my household.

    By contrast, we've had one computer fail on us and not be worth repairing: a 10-year old Mac G4. The Mac G5 is almost 6. So if I were into being a Fanboy of some sort: Microsoft made me do it...

  • Report this Comment On August 17, 2010, at 2:52 PM, Jay262 wrote:

    atassaad what makes you think the quality of the hardware inside a 360 is laughable? What do you actually know about electronic components to make that statement? The fact is the RRoD is caused by to much heat which makes the solder melt and then you get a failure. So ya maybe a poor airflow design but a lot of people do make the mistake of putting their xbox in a poorly ventilated area. If it does fail Microsoft will fix it for free or just buy the new 360 which no longer has the problem.

    You can't compare a gaming console to a computer either. Microsoft doesn't even make a computer. It makes an operating system. Dell, HP, etc. are the ones making the hardware.

    The truth is ALL hardware manufacturers are going to have problems since the components do come from the same places, Apple just happens to tack on a premium price tag for the little apple logo. If you want to get around all of this you'll have to build your own system which can actually be quite fun and you'll save a lot of money since you don't have to deal with the big manufacturers.

  • Report this Comment On August 17, 2010, at 9:08 PM, alexkhan2000 wrote:

    A hardcore gamer's phone? Is that all MSFT has left in its playbook?

  • Report this Comment On August 18, 2010, at 8:56 AM, atassaad wrote:

    Ok Jay, thanks for the ad hominem. I'm an engineer. I cofounded a company for electronic parts placement, and I'm probably twice your age. That said, the design is laughable. The X-clamps place a bending stress on the hottest parts of the board with itsy bitsy surface solder components right where it's straining the board. If you don't believe me just watch the voodoo experiments people keep performing on these poor boards (baking the darn thing to "remove the bend"? oy). As for the heat sink on the GPU, it's way too short (and I don't care for "the supplemental fins in the wake of the CPU heat sink). If you're putting cross flow cooling on a finned surface, you have to make it deep enough for the flow to contact enough fin surface. With any flex or relaxation over time in the X-clamp, there is no guarantee of good contact between heat sink and chip surface. The genius of etching the word Microsoft and sundry gibberish into an already small mirror-finish surface of thermal contact made me smile too (that's on top of the CPU and GPU if you must know). I looked under a 30x microscope and the capacitors were off on the pads too. I know enough about ventilation to place the Xbox on a flat, cabinet-top surface with nothing around it in an air-conditioned house. After all, the darn things were overheating all over the world, so all I need is reading skills to get that picture.

    But hey, Jay said I must be stupid or something to criticize a design that keeps failing reliably. My apologies.

    I spoke about my experience with the 360. You just went on nothing but an assumption about how I must be ignorant. You do the math about what I'm assuming about you now.

  • Report this Comment On August 18, 2010, at 1:20 PM, gatorstew wrote:

    Engineering talk aside, any other consumer product in history with the failure rate of the 360 would have bombed. However, they keep selling more of them (take a look at sales trends). Even people who have had their's break keep buying NEW ones. That says a lot.

  • Report this Comment On August 18, 2010, at 1:22 PM, Yoynk wrote:

    Windows phone 7 is too late!.. The added benefit to playing a graphically inferior, and dumbed down version of even the most beloved xbox live games on a phone will not attract the hardcore gamer or even mainstream. If gamers want to play a game on the go they will fork down the money for the hand held PlayStation or Nintendo alternatives for the better on the go gaming experience, especially with the new models such and Nintendo 3ds. Gamers play these games for the best experience, not a mediocre one that a phone could provide at best. Graphics, controls, and function are all way behind with this windows phone 7; if the phone were to have all this, it would not be a phone.

    Why is the windows phone 7 late? Because consumers are already locked in to a contract using their iphone 4g, 3g, or droid phones which provide nearly all the functions that the consumers can handle and or use.

  • Report this Comment On August 18, 2010, at 1:33 PM, gatorstew wrote:

    The idea itself is actually pretty old and was thrown around by MS before it even rolled out the 360. The idea of playing 'an aspect' of the full game on the go was and probably will be very appealing to the target demographic. Most are not understanding their goal. They're not trying to compete with Apple's app store, a PSP, DS, etc. They would have released such a product if they wanted to. What they want to offer is a 'continuation' of sorts while on the go of the full game you have at home so when you do get home you can upload anything you've done to the full game. Think a racing game where you can customize, paint, etc your car and upload that into the full game when you get home. Or an RPG where you can somehow upgrade your character while on a long road trip and then when you get back home just update your character's status. The possibilities are endless. Some of you have good points but I think you're missing the point.

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