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To top iPhone sales, Microsoft must aim low

Gartner and IDC both predict Windows Phone 7 victory over iPhone

By , Network World
April 07, 2011 02:39 PM ET

Network World - Our colleagues over at IDC caused some chuckles to break out across the tech world when they predicted that Microsoft's Windows phones will beat the iPhone in market share by 2015. Impossible! Absurd! seemed to be the default responses.

But is it really so far-fetched? Gartner, the other giant tech analyst firm, now agrees with IDC in a new report that says Windows phones will take 19.5% market share by 2015, compared to 17.2% for Apple's iOS.

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While it's tough to predict outcomes in such a volatile market four years in advance, there are plausible scenarios under which Microsoft can topple Apple in market share. To do so, Microsoft must position Windows Phone 7 as a low-end smartphone, almost like a high-end "dumb" phone, while Apple continues going after the highest, most expensive end of the mobile market.

Microsoft and its partners are, in effect, already doing this. Search Amazon and you can find Windows phones such as the Samsung Focus, LG Quantum and HTC Surround for just one cent from AT&T. (See also: Fire sale on Windows Phone 7.)

If your phone can check email, surf the Web, and play music and videos it already does most of what a typical iPhone owner uses the device for. And if it's free, rather than $200 to $300, many people will take it.

One thing to remember is the smartphone market is not yet the biggest piece of the cell phone world. As Network World's Julie Bort recently reported, 65% of mobile phone buyers plan to buy another "dumb" phone.

I moved up from a dumb phone to an Android last year after weighing the price against the benefits. Including taxes, I was already paying $50 a month for a basic voice plan with limited texting. I could get a free phone and pay another $10 a month for email, which I wanted. But an unlimited data plan from Verizon was $30 a month, so in effect I would pay just another $20 a month, raising my monthly fee by 33%, for the opportunity to upgrade from a phone that did almost nothing to a phone that does everything.

Once I decided the extra $20 a month was worth it, I had to pony up another $130 for a Motorola Droid. IPhones cost $300 for the 32GB model. Both of these prices are less than what $20 a month costs over the two years of a contract, but since it's an up-front charge the price of the phone is still a barrier for those who haven't made the move from a dumb phone to a smartphone.

But what if all these dumb phone buyers suddenly can get a smartphone for free? That extra monthly fee doesn't look so bad all of a sudden. And if a large portion of regular phone owners upgrade to smartphones between now and 2015 there's no reason to think many of them won't choose a cheap Windows phone as long the iPhone continues to cost $200.

All business: Windows Phone 7 takes Office, SharePoint to new level on mobile

To be sure, Microsoft and its partners will still sell some $200 phones, but it won't be the minimum price.

Android will continue to soar, with Gartner predicting that Google's mobile OS will take nearly 50% market share by 2015, leaving Windows Phones and iPhones battling it out for second place.

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