Microsoft and BlackBerry Fighting for 3rd Place in Mobile

The mobile computing business has changed virtually everything we used to take for granted in the old computer business. When the PC market was first established, a network effect created two major players, Microsoft (NASDAQ: MSFT  ) and Apple (NASDAQ: AAPL  ) . A network effect is when the number of users on a certain platform draws more users to the platform, creating a reinforcing loop for the company creating the network effect.

Microsoft was the clear winner in the '80s, pushing out all other operating systems and relegating Apple to a low-share second place.

But the mobile business has turned that model on its head. Instead of being difficult to change between operating systems, it's very easy. We've gone from Motorola being a dominant player to a desperate sale to Google (NASDAQ: GOOGL  ) . Nokia used to kill in mobile share, including smartphones, but now it's desperate to become relevant again. BlackBerry (NASDAQ: BBRY  ) used to own the business market and now it's a has-been searching for a way back to relevance.

The point is, mobile changes quickly and investors need to be on the lookout for what's next, not what's been popular in the past.

The next big thing
We all know that Apple and Google currently dominate mobile. But we've seen in the past that leads in mobile are fleeting and an interesting battle is emerging for third place between BlackBerry and Microsoft, a battle that will likely define the stock trajectory of both companies going forward. Microsoft recently launched Windows 8 along with mobile versions of the software and BlackBerry has now introduced BlackBerry 10.

Both companies have struggled in mobile, to say the least, and both are trying to put their best foot forward to attract customers. BlackBerry is trying to attract customers by essentially making Android apps available for BlackBerry 10. The new operating system has an Android Player that makes it easy for developers to add Android apps to the BlackBerry platform. This gives BlackBerry a large ecosystem of apps to attract customers.  

Microsoft, on the other hand, is counting on Windows 8 to draw consumers to its devices. When you dominate the PC landscape, you have the advantage of making people comfortable with your interface while also drawing developers and businesses to your operating system. The challenge for Microsoft is that it doesn't have a large developer network for mobile yet. Its operating system is getting a lot of (surprisingly) strong reviews online, but unless 2013 is filled with developers building apps for Windows Phone 8, the OS won't be a success.

Who wins third place?
Both BlackBerry and Microsoft have their advantages in the battle for third place in mobile. Leveraging the Android app system is a huge bonus for BlackBerry, although I'm sure it would rather have developers build native apps using BlackBerry's unique features. Microsoft has a big advantage by dominating the PC operating system and a much larger balance sheet, meaning it can essentially bribe its way to decent market share if it needs to (see Microsoft's deal with Nokia).

But I think the winner will come down to something far simpler -- brand.

The market share leader is rarely the most-loved device, something Apple enjoyed for a surprisingly long time. With iOS aging and other emerging operating systems superior in many ways, we could see the underdog become the hot item. At this point in its history, Apple doesn't play the underdog role. This leaves an opening for BlackBerry or Microsoft.

BlackBerry's problem playing the underdog is that it wasn't long ago it was top dog. BlackBerry isn't a cool name among the kids these days. It's not even a cool name among the business community. Business heard the cries of employees and opened up email and other systems to iOS and Android so people could get away from the clickity-clack of BlackBerry phones. Going back now would be so... uncool.

Somehow, Microsoft gets to play the underdog role here. I even find myself rooting for Windows 8 to succeed in mobile, despite the fact that I'm tied to all things Apple.

I don't know if Microsoft will take a reasonable amount of share from Apple and Google in 2013, but I give it a better shot than BlackBerry. We've beaten up on Microsoft for more than a decade so maybe now is the time for something of a comeback story.

More about Microsoft
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


Read/Post Comments (7) | Recommend This Article (7)

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 February 14, 2013, at 10:08 PM, TimKnows wrote:

    Did anybody else find something correct or worthwhile in this article? I wasted my time reading this article, don't you do the same.

  • Report this Comment On February 15, 2013, at 7:52 AM, Arthur1111 wrote:

    Blah blah blah ...

    Out of all the articles and analysis I read, the fools have the most idiotic ones.

  • Report this Comment On February 15, 2013, at 8:04 AM, magnaman1969 wrote:

    I guess you didn't realize Blackberry is ALREADY in 3rd position...and BB10 will just solidify that.

    Also..your precious Apple is helping out in a HUGE way...why not report on this:

    http://www.cnn.com/2013/02/14/tech/mobile/iphone-password-ha...

  • Report this Comment On February 15, 2013, at 8:20 AM, randomroyalty wrote:

    Fool!

    The key to Blackberry's success is not Android apps, but the functionality of the phone and the OS. Simply, BB10 is less annoying and frustrating than the competition for managing communications, keeping track of things and calendaring. Oh, it happens to play games really well, too and did we say you can run Android apps?

    This is about getting things done efficiently. Something the others seem to have forgotten is the essence of technology.

    Apple used to get this, and focused on the human interface. MS does a pretty good job but is losing its focus with Windows 8 as it attempts to appeal to the masses.

  • Report this Comment On February 15, 2013, at 8:40 AM, cbglobal wrote:

    Best they not fall for the media obsession with market share. Just sell the best product you can to your customers. Look what focusing on market share did to GM and Chrysler. Selling goods at a loss to gain or hold on to business only lasts so long.

  • Report this Comment On February 15, 2013, at 10:07 AM, knickers14 wrote:

    I don't even think this is going to be close by end of year 2013.

    Besides all of MS's cash and the current OEM's Huawei, Samsung, HTC and the rumored LG coming back to WP, Nokia alone could make WP the third ecosystem.

    BlackBerry has one BB10 device selling in 3 countries at the moment and no plans for any low end devices this year. And as we know from the decrease in subscribership last Q, introductory BB7 devices can no longer be counted on to maintain the base.

    Nokia, on the other hand, now has 3 WP8 phones in nearly 150 countries and their WP7.x phones, that are also selling well, received an update to mimic the WP8 experience.

    On top of this, Nokia will be introducing the sub $200 L520, mid range L720, a Verizon exclusive device and the updated L920 at MWC in 10 days. Oh, a whopping 41megapixel high end device and are rumored to also have a phablet and WP tablet with a newly updated WP8 release (Apollo+).

    Now the number of devices don't always assure you success but Nokia is getting things done, servicing every market and preparing to launch bigger and better devices before BB can even get their Q10 out the door.

    when you really compare the two, you almost feel sorry for BB... And that's just one WP OEM.

  • Report this Comment On February 15, 2013, at 11:13 AM, theflew wrote:

    @magnaman1969

    BB7 is in 3rd position. BB10 will eat into BB7 sales and it will not be a 100% conversion rate given BB7 users in developing countries have been buying much cheaper devices than BB10 devices.

    The same thing could be seen much of 2011 as Windows Mobile and Windows Phone. Also given BB's rollout you won't be able to make any real judgement until Q3. Given Q4 2012 results, WP will outsell BB in the US Q1 2013. The question at this point is will it do it worldwide? And if WP outsells BB in the UK Q1, then BB is in for a long year.

    For BB10 to be successful BB10 devices has to sell well in Canada and the UK.

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