Can Microsoft Break the Carriers' iPhone Addiction?

There are three separate groups at the Consumer Electronics Show -- which opened today in Las Vegas -- that must be desperately rubbing rabbits' feet, crossing their fingers, and praying for the same thing: Please, oh, please, let the expected introduction of the "Ace" be a huge success. There is a lot riding on the outcome.

Those groups include Nokia (NYSE: NOK  ) , the Finnish cell-phone maker whose latest smartphone, the Lumia 900 (aka Ace), is thought will be introduced at the show. Nokia, despite its accomplishments at selling cell phones in the emerging markets of the world, has been notably unsuccessful with its previous forays into the world of smartphones. The company really needs a hit here.

Next, there is Microsoft (Nasdaq: MSFT  ) , the maker of the Windows Phone mobile operating system. It also has failed in its previous attempts to excite smartphone buyers. Microsoft's earlier Windows Mobile OS was considered too complex and was unfortunately installed on comatose handsets from Samsung and Motorola. While Microsoft flummoxed around trying to come up with something better, first Apple (Nasdaq: AAPL  ) with its iPhone, and then Google with its Android mobile OS, were carving out seemingly unsurpassable shares in the smartphone marketplace.

And finally, according to reports cited by Credit Suisse analysts, there are the wireless carriers, which are hoping that the Windows Phone OS will provide another competitor for those iPhones and Android-run devices.

Light Reading reports that assessment has been seconded by Chris Collins of marketing research company Compete: "Carriers won't publicly talk about this, but they're dying for a third ecosystem to emerge. Having an Apple/Android duopoly doesn't play to their best interest."

The mobile carriers have had to shell out vast sums in infrastructure costs to build out their networks and upgrade them to the latest 4G LTE specs. To pay off the huge debt they have incurred, the companies must entice subscribers with the phones they want most. That is often the expensive iPhone. But to make those iPhones affordable, the carriers have to subsidize most of the cost. Verizon NYSE: VZ) reported last week that after doubling its iPhone sales quarter-to-quarter, its profit margins were trimmed by 5%.

AT&T (NYSE: T  ) is the carrier anticipated to be the one to introduce the Ace at the show and announce it will be inserted into its lineup of 4G LTE-capable phones. Ironically, AT&T was the first network to acquire the rights to sell the iPhone. Though it wouldn't be the first U.S. carrier with a Nokia Windows Phone -- T-Mobile got there first with a lower priced 3G version, the Lumia 710 -- the company will be the first to try to wean itself off its iPhone addiction with a Windows Phone.

Will Ace do the trick and storm the iPhone castle for Microsoft and its Windows Phone, or will it be just another barbarian falling into Apple's moat?

Meanwhile, keep track of these companies by putting them on the Fool's My Watchlist:

Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of and creating bull call spread positions in Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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