Danger Debacle Highlights Microsoft's Dilemma With Mobile
16 October 2009 - 6:18AM
Dow Jones News
A data failure at Microsoft Corp.'s (MSFT) Danger mobile
subsidiary shows that the software giant still faces major
challenges with its mobile strategy.
The outage - which saw hundreds of thousands of customers lose
data - likely won't fatally damage Microsoft's mobile plans, but
the incident has thrown an unwanted spotlight on the company's
attempts to shore up lost market share to rival mobile operating
system makers, and re-ignited questions as to what Microsoft wants
to achieve with mobile.
"Microsoft is behind the curve," said Avi Greengart, analyst
with Current Analysis. Greengart said the company is competing with
a growing list of competitors, including Apple Inc.'s (AAPL)
iPhone; Research in Motion Ltd.'s (RIMM) Blackberry; Google Inc.'s
(GOOG) Android and Palm Inc.'s (PALM) Web OS.
Last week, about 800,000 owners of the Sidekick - a Danger
device operated by T-Mobile, a unit of Deutsche Telekom AG (DT) -
lost data stored on their machines due to a back-up failure.
Microsoft said Thursday it had recovered most of the data and would
start restoring it to customers.
Microsoft acquired Danger in 2008 for a reported $500 million,
although it hasn't disclosed the cost. Danger provides valuable
research and development that feeds into and enhances the company's
mobile strategy, said Aaron Woodman, an executive working on the
company's mobile business.
Microsoft's challenge is balancing two goals with its mobile
business: ensuring its Windows operating franchise - which in
fiscal 2009 generated about a quarter of the company's revenues -
can be as ubiquitous in mobile as it is on the desktop; and
designing an experience that can compete with the feature-rich
devices from its peers. The Windows Mobile operating system,
primarily targeted at business users, is seen as lagging as a
consumer device.
"The Internet and computing are converging," said Roger Entner,
analyst for Nielsen Co. "If they don't play in mobile, there won't
be a Microsoft in 20 years."
The popularity of smartphones like iPhone and Blackberry has put
Microsoft on the back foot. Two years ago, Entner said, the company
enjoyed almost 50% market share of the U.S. mobile operating system
market. Now, it's about 27% according to Nielsen's research. With
over 30 million phones running the operating system, technology
research firm IDC says Microsoft's global market share is 11%.
Microsoft licenses Windows to handset makers like Samsung
Electronics Co. (005930.SE) and HTC Corp. (2498.TW). The model
gives Microsoft access to a broad customer base, especially in
business where tech managers want a choice of carriers and
providers; however, critics argue the strategy hurts the company's
ability to innovate, such as with touch-screen capability. In
contrast, Apple and RIM can optimize their operating systems to
work with their phone hardware.
Microsoft also hasn't built the same momentum in third-party
mobile applications that rivals like Apple enjoy.
"Windows Mobile was built as a productivity-oriented operating
system, but the business and consumer user experiences are
merging," Greengart said, "because employees are consumers
too."
Microsoft has improved the user experience with its recently
launched Windows Mobile 6.5, and reports suggest that the next
operating system launch, Windows 7, could incorporate features from
its Zune digital media player.
Microsoft admits some missteps with mobile. "The market has
shifted faster than even Microsoft expected it would," Woodman said
in an interview.
"It's hard to find phones which have the distribution of ours.
But the complexity of the model has hurt our ability to control the
experience. We have to evolve that model over the next few years."
While Microsoft doesn't believe it needs to build its own phone
hardware, Woodman said, the company is "open to a variety of
models."
If it can make Windows 7 as attractive to consumers as it is to
the IT managers who buy mobile phones for their employees, it could
regain lost ground, said IDC, which forecasts that if Microsoft can
absorb these lessons in time for the next upgrade, it can win three
percentage points of share in the global mobile operating system
market by 2013. But, as Greengart said, the pressure is on: "If it
doesn't happen in Windows Mobile 7, they are in real trouble."
-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455;
jessica.hodgson@dowjones.com