Will the Flagship HTC One Phone Help Microsoft Turn Around Windows Phone?

The manufacturer is the first to offer a top-tier phone for Windows that is not made by Microsoft's Nokia division.

Aug 21, 2014 at 4:00PM

Microsoft (NASDAQ:MSFT) has struggled to get partners to make phones that run its Windows Phone operating system. This has contributed to the company's failure to establish a user base for the OS, which has less than 4% market share, according to IDC.

The major phone manufacturers have mostly avoided Windows Phone because the OS does not have enough customers to make it worth their while. Users have stayed away because aside from the Lumia 930 phone made by Microsoft's Nokia division, none of the major players in the mobile space have made a version of their flagship available that runs the OS. It's a cycle that dooms Windows Phone to failure if both sides remain resolute.

Fortunately for Microsoft, HTC has decided to break the cycle and make its flagship HTC One available in both a Windows Phone and a version running the much more popular Android operating system from Google (NASDAQ:GOOG)(NASDAQ:GOOGL). While HTC had only 5.3% of the smartphone market as of April, according to the latest comScore report, the company's actions will serve as an important test case for other manufacturers.

If customers are willing to buy a Windows Phone-powered HTC One in reasonable numbers, then it might be worth it for market leaders Samsung, LG, and Motorola -- which is in the process of being sold by Google to Lenovo -- to consider porting over their flagship models. HTC's move will not on its own revive Windows Phone, but it could be the spark that starts the fire.

How poorly is Windows Phone doing? 
On the plus side for Microsoft, the latest report on smartphone operating systems from IDC shows that Windows Phone has clearly supplanted BlackBerry (NASDAQ:BBRY) as the No. 3 operating system behind Android and Apple's iOS. The bad news is that happened more because BlackBerry fell off the map, dropping from 2.8% market share in the second quarter of 2013 to 0.5% in the second quarter of 2014, according to IDC. During that same time period, Windows Phone dropped from a 3.4% market share to a 2.5% share. So, while third place is better than fourth, Windows Phone is decidedly Royal Crown to IOS and Android's Coke and Pepsi.

Results are bad and getting worse for Windows Phone, but HTC's decision to make the One available on the platform removes the "but there are no good phones" argument for any consumer who was considering giving the OS a chance. 

Will the HTC One make a difference?
When the Lumia 930 was released, CNET reviewed it and gave the phone sort of a mixed blessing. It headlined the review, "The Best Windows Phone Device To Buy Right Now," but it only gave it three and a half stars. The reviewer, Andrew Hoyle, liked the phone's display and overall look but cited battery life as a major negative. He also referenced the poor selection of apps available for Windows Phone in general and ended his review with a dig at the OS, saying that "a high-end Android device with a good camera will likely be a better option for many of you."

CNET's Scott Stein wrote about, but did not give a formal score to, the version of the HTC One that is being offered for Windows Phone. He seemed much more positive about it than his colleague was about the Lumia 930. "It's a familiar Android phone, and a really great one, that now can be had with Windows Phone 8.1," he wrote in his highly positive assessment, which concluded with the ideas that HTC could pave the way for other companies to follow: "...at least this HTC One M8 shows that more iconic phones can make it over to Windows... eventually."

Of course, Stein also had to take a dig at the selection of apps in the Windows Phone app store, which is something that won't be any different no matter which handset a customer buys. That argument is overplayed, as the vast majority of the major apps -- or reasonable alternatives -- are available. Yes, WIndows Phone only has 300,000 apps, compared to the many more available for Android and iOS, but how many of those are actually used? 

Windows Phone offers enough apps that HTC One -- or any other phone offered on the platform -- should be judged on its own merits, and clearly, the One measures up.

Will it help Microsoft?
Microsoft is facing a very tough battle in getting people to use Windows Phone. Having a better phone selection puts them in the game a little bit more, but it only solves one problem. The perception of the apps store also scares customers away. Microsoft also has a tough argument to make that using a Windows phone if you have a Windows PC or tablet is important because so many people already have experience marrying their Android phone or iPhone to the Windows PC ecosystem.

The launch of HTC One for Windows is critical for Microsoft. If the phone succeeds, it will keep HTC in the Windows Phone game and cause other manufactures to follow. It's an uphill battle overall, but Microsoft does not need to overtake Android or iOS in a quarter. The company needs to show it can grow market share and become a player. The HTC One -- which is being offered to customers of the two biggest wireless carriers, AT&T and Verizon -- could offer that proof to other manufacturers. Microsoft is playing a long game here, but if the HTC One fails, the game could be over very quickly.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Daniel Kline has no position in any stocks mentioned. He would consider a Windows Phone if Sprint offered one. The Motley Fool recommends Coca-Cola, Google (A shares), and Google (C shares). The Motley Fool owns shares of Google (A shares), Google (C shares), and Microsoft and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

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