Can Microsoft Beat Apple in China?

Microsoft (Nasdaq: MSFT  ) won't settle for second place.

Simon Leung, Mr. Softy's chairman and CEO for the Greater China region, says his Windows phones will pass the Apple (Nasdaq: AAPL  ) iPhone in Chinese sales. Then it moves on to crush the market-leading Google (Nasdaq: GOOG  ) Android platform, too. This will happen as Microsoft encourages its hardware partners to make low-cost handsets, putting Redmond-approved smartphones in the hands of cash-strapped Chinese users for the fraction of an iPhone's cost.

"Our goal is No. 1," Leung said at this week's introduction of Windows Phone 7.5 in Beijing. "Having a goal to be No. 2 is not really a goal."

That's an audacious ambition for sure, though Leung never set a deadline for meeting any of these lofty targets. Keep in mind that Microsoft currently has exactly one Windows phone in the Chinese market: the big-screen HTC Eternity. All-in Microsoft partner Nokia (NYSE: NOK  ) is expected to introduce its first Windows phones for this market by the end of the month, and local phone builder ZTE will soon follow suit. Can slow and steady really win this race?

The Apple-crunching ambition may not be entirely crazy, because the iPhone has only a partial foothold in the Middle Kingdom. Apple's smartphone share in China is just 7.5% today, or one-third of Samsung's Android-powered army -- and shrinking. Along with the iPhone's unattainable prices, the iPhone isn't compatible with China Mobile's (NYSE: CHL  ) networks, and it's never a great idea to leave the largest operator in the world's largest market unsupported. And since China Mobile wants a share of Apple's App Store sales before cutting a deal, that problem will go away just after the Knicks win the Super Bowl.

But Android would be a tougher nut to crack. One mobile analyst in Beijing expects Windows Phone to eclipse iPhone with a 15% market share as soon as 2013, but he still sees Android holding a dominant 60% share by 2016.

So Microsoft might have to settle for second place in China after all, but you don't have to go for the silver, dear Fool. Our top analysts have found a world-beating stock that capitalizes on emerging markets. Grab a copy of The Motley Fool's Top Stock for 2012 and read all about it. But hurry and get it right now -- that special report won't be free forever.

Fool contributor Anders Bylund owns shares of Google but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Google, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Nokia, Google, China Mobile, Apple, and Microsoft and creating bull call spread positions in Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


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  • Report this Comment On March 22, 2012, at 12:33 PM, lucasmonger wrote:

    If US phone sales are any indication, Microsoft is foolish to think that people will pick their phone over IOS and Android... unless they give the phones away for free... but where's the profit in that?

  • Report this Comment On March 22, 2012, at 2:48 PM, jdwelch62 wrote:

    Don't be US-centric, Lucas. The rest of the world Loves Nokia, which means there will probably be significant adoption of the Lumia phones, which run the MS WinPhone OS. I wouldn't count them out yet...

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