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37 Million Reasons to Take Microsoft Seriously

When Microsoft (Nasdaq: MSFT  ) agreed to pay Nokia (NYSE: NOK  ) billions to back its fledgling mobile operating system, it was easy to wonder what Mr. Softy was going to get for its money.

Finland's Nokia is the world's largest handset manufacturer, but the booming popularity of Apple's (Nasdaq: AAPL  ) iOS and Google's (Nasdaq: GOOG  ) Android were rendering the company irrelevant with every passing quarter.

Nokia obviously can't crank out iPhones, and it was apparently too proud to put too much weight behind the Android movement. The Symbian smartphone platform that Nokia was championing was big but was fading fast. Nokia decided to take Microsoft's money over riding Symbian into the ground, and now we're starting to see the fruit of that monetary harvest.

Nokia is showing off the Lumia 900 this week. Regardless of if it's a hit, the Windows Phone-powered Nokia handsets will continue to trickle in -- and it's going to be a deluge.

Morgan Stanley now expects 37 million Nokia-Microsoft phones to ship this year, followed by 64 million more handsets in 2013. We're talking about more than 100 million Windows Phone smartphones hitting wireless carriers within these two years, if Morgan Stanley's on target.

That's huge when you consider that just 1.7 million Microsoft handsets hit the market during last year's third quarter, according to trend tracker Gartner. Nokia's push won't get it up to Android or iOS levels, but it won't be long before Microsoft overtakes a fading Research In Motion (Nasdaq: RIMM  ) and the Symbian zombie for the bronze.

Let's revisit Gartner's data for the third quarter.

Operating System

Q3 Handsets

Q3 2011 Share

Q3 2010 Share


60.5 million




19.5 million




17.3 million




12.7 million




2.5 million




1.7 million



Source: Gartner.

Flooding the market with product doesn't mean that folks will be buying, but Microsoft's made too big a wager to go down without a fight. If there's a glut of phones, carriers will just cash in by practically giving them away in exchange for two-year contracts.

One way or another, things will get interesting once the platform is in the hands of the masses. Developers will drum up app support. Windows may actually be cool again on some level.

It's just a little light rain out at the moment, but Microsoft's storm is coming.

After years of bashing Microsoft, I'm changing my tune. I entered a bullish CAPScall on Microsoft in Motley Fool CAPS this week, reversing my earlier bearish pick. If you haven't read about the two words giving Bill Gates and Steve Ballmer fits, it's a free report, so you as may well check it out now.

The Motley Fool owns shares of Google, Apple, and Microsoft. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Google; and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (3) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2012, at 2:21 PM, sachamay wrote:

    Do you think Windows Phone and Nokia will succeed in 2012 and beyond?

    Check out this article:

  • Report this Comment On January 12, 2012, at 2:24 PM, makelvin wrote:

    Interesting... your entire thesis as to why there are 37 million reasons to take Microsoft seriously is based on hypothetical projection made by Morgan Stanley's analyst. If you are to really to make such an assertion as reality, at the very least, please provide the historical success rate vs. his/her flops of this particular analyst's ability to make any kind of long term projection.

  • Report this Comment On January 12, 2012, at 4:20 PM, Inept wrote:

    These Nokia WP7 volume predictions are absolutely ridiculous, in my opinion. I think half that number would be a huge win for Microsoft and Nokia.

    I agree with the MS prediction of around 1M WP7 units from Nokia for Q4 but I do not see any reasonable basis for the explosive growth predictions made here. What's the catalyst? The mere combination of Nokia and WP7?

    WP7 devices have been available on American carriers for over a year now and have failed to gain traction. We don't have numbers for 2011 and Microsoft may never share them, but Gartner estimates seem to point to maybe 6-8M devices for the year. Nokia smartphones have been available on American carriers for much longer than a year and the company has seen only decline in this time, almost to the point that people don't even recognize the brand in America anymore. Is the combination of these two turkeys suddenly going to produce a miracle?

    I think that Microsoft will eventually find its niche in this market, but it will be a hard-fought battle of many years and it won't result in a dominant position. Microsoft and Nokia are aiming to be the "third ecosystem" and honestly I think that might be good as it gets for them.

    I doubt we'll see the huge explosion in WP7 unit volumes that Morgan Stanley is predicting here. I'm not even sure I see a catalyst until Windows 8 is released and Microsoft's portfolio of products is truly integrated into a robust platform offering.

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