Bloomberg News

Microsoft Unveils Latest Windows Phone 8 Seeking Gains

October 29, 2012

Microsoft Unveils Latest Windows Phone 8 Aiming for Share Gains

Windows Phone 8 start screens. Source: Microsoft Corp.

Microsoft Corp. (MSFT:US) unveiled a new version of its software for smartphones today, redoubling an effort to regain market share lost to Apple Inc. (AAPL:US) and Google Inc. (GOOG:US)

New features include a new Pandora Media Inc. (P:US) app with a year of advertising-free Internet radio, a program that helps customers use less of their wireless data capacity and an app that lets parents control what programs and features their children can use, Microsoft Vice President Joe Belfiore said today at an event in San Francisco.

Windows Phone 8 software, running on devices with better screens and more powerful chips, will rely for the first time on the same underlying programming code as the flagship Windows operating system. Microsoft, with just 3.5 percent share of the smartphone market in the second quarter, seeks to close a gap with Apple’s more popular iOS and devices from Samsung Electronics Co. (005930) and other makers that use Google’s Android.

“The platform looks very competitive,” Al Hilwa, an analyst at research firm IDC, said of Microsoft’s new lineup. Hardware will be “on par with iOS and Android devices” in terms of power, screen resolution, camera and data speeds, he said.

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Nokia Oyj (NOK1V)’s Lumia 920, featuring a 4.5-inch (11-centimeter) screen and an 8.7-megapixel camera, will run on Windows Phone 8. HTC Corp. (2498) will sell two devices -- the Windows Phone 8X and the 8S -- which sport a new design, better audio and a wide-angle camera.

Carrier Push

Microsoft Chief Executive Officer Steve Ballmer said the new phones go on sale in Europe this weekend and in the U.S. in November at AT&T Inc. (T:US), Verizon Wireless and T-Mobile USA stores, as well as Microsoft’s own retail outlets.

Aside from improving phone hardware and adding features to the software, Microsoft’s biggest challenge lies in how to market its mobile products, particularly in the stores of U.S. carriers where salespeople often recommend iPhones and Android devices.

Carriers and handset makers have been providing sales staff with their own Windows Phones in an effort to get them excited about the products, said Thom Gruhler, a vice president recruited in March from McCann Worldgroup to improve the Windows Phone’s marketing.

“I don’t want to say we’ve got it all solved, but the important thing for us is there’s excitement among retail sales personnel,” he said. “This isn’t a panacea. It’s going to improve this holiday and improve the next holiday and the next after that. It takes time and attention from us.”

Marketing Pitch

Microsoft will also back the effort with its biggest advertising campaign ever for Windows Phone, he said. The campaign, which will begin in the coming weeks, will focus on the product and how users can personalize phones, he said.

Gruhler also noted that Verizon, which had previously sold only one Windows Phone model in the two years the devices have been on the market, is showing a new level of commitment by selling three different models this holiday.

Helping to boost Microsoft’s case with consumers, Windows Phone now has 120,000 apps, including 46 of the top 50 on rival phones, Microsoft’s Belfiore said. Pandora, for example, had been a long-time holdout.

There are more than 700,000 apps on Apple’s store, including more than 275,000 specifically for the iPad tablet computer. There are about 700,000 apps for Android devices, Google said.

Apple’s Popularity

Operating on phones with a dual-core chip and high- definition screens, Windows 8 supports near-field communication technology, which lets customers use phones to make payments. Redmond, Washington-based Microsoft initially discussed some of the features in June.

The new Windows Phone 8-based devices are aimed squarely at Apple’s iPhones, which have a market share of 17 percent, as well as smartphones based on Google’s Android software, which accounted for 68 percent of the market, according to Framingham, Massachusetts-based IDC.

The iPhone 5 sold 5 million units in its debut weekend, or about the same number of Windows Phone devices shipped in the entire second quarter, based on IDC’s data.

Consumers heading into the U.S. year-end holiday shopping season are being offered a bounty of choices. Apple began selling the iPhone 5 last month with a bigger screen, lightweight body design and faster processor, and Google today unveiled new versions of its Nexus smartphone and tablet, which showcase Android’s latest features.

Mobile Shift

Windows Phone software has declined in annual market share for the past three years, according to IDC data compiled by Bloomberg Industries, even in 2010 when it was revamped. There is some growth, with second quarter market share climbing from 2.3 percent a year earlier, according to IDC.

Still, Microsoft as a whole is grappling with the shift to mobile computing, with first fiscal quarter profit and sales missing analysts’ estimates. For the first time in a decade, the total PC market will contract this year, by 1.2 percent to 348.7 million units, according to IHS ISuppli.

Microsoft, which is revamping its software across the board, introduced Windows 8, a new version of its software for PCs, last week. With the suite of new software, the company is aiming to push Windows, which dominated the market over the past two decades by running on nine out of every 10 personal computers, into mobile computing.

Microsoft shares advanced 1.2 percent to close at $28.21 in New York on Oct. 26, and are up 8.7 percent so far this year. Trading was canceled today due to a hurricane on the East Coast.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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