Windows to Throw Smartphone Market Wide Open

The worldwide mobile phone market will grow slightly more than 4 percent in 2012 — the smallest year-over-year increase since 2009, according to IDC. The decline is attributed to a slowdown in feature phone shipments, which are projected to drop by 10 percent, and a lackluster global economy.

The other surprise in the report is that the smartphone industry — whose growth will be subdued as well — will include a competitive Windows Phone 7 OS among its major players.

Microsoft’s alliance with Nokia will be largely to thank for that, Kevin Restivo, senior research analyst with IDC’s Worldwide Quarterly Mobile Phone Tracker, told the E-Commerce Times.

“The resurgence of Nokia and the rise of Windows Phone 7 market share will be concurrent trends,” he said.

They will be instrumental in converting many feature phone users into smartphone users, especially in emerging markets, added Restivo.

In fact, Windows Phone 7 will claim more than 19 percent share to become the No. 2 OS in 2016, IDC predicted.

Snapshot of the Current Market

In the meantime, the mobile phone industry will have to slog through 2012, which is shaping up to be a ho hum year for vendors. Nearly 1.8 billion mobile phones are expected to ship this year, compared with 1.7 billion units shipped in 2011, according to the IDC Worldwide Quarterly Mobile Phone Tracker. By the end of 2016, that number will have slowly risen to 2.3 billion mobile phones.

The economy is the reason for the slowdown, especially among feature phone users, who would prefer to hang on to their current handsets instead of spending money on new devices. Feature phones still comprise 61.6 percent of the total mobile phone market, IDC said.

Smartphone Growth

Smartphones will see growth this year, offsetting much of the decline in the feature phone market. The segment will grow 38.8 percent year over year, with 686 million units shipping in 2012, IDC projected.

Android will be the leading OS in the smartphone market throughout the five-year forecast period, with its share peaking this year, the research firm said.

iOS will maintain its solid foothold in the North America, Western Europe, and Asia/Pacific markets, but its growth will moderate over the next five years unless it can dig deeper into emerging markets, said IDC. iOS will likely see a small market share decline, but its overall shipment volume will continue to grow through 2016.

Microsoft’s Not-So-Secret Weapon

The expected boost in Windows Phone 7 OS is clearly being fueled by Nokia’s decision to phase out Symbian as it makes the shift to Windows. Symbian-powered smartphone shipments will cease by 2014, IDC predicted.

There are other factors that will drive Windows Phone 7 OS, said Rita Gunther McGrath, associate professor atColumbia Business School.

For starters, Verizon and other platform companies are eager for a third ecosystem to compete with Google and Apple, and they will embrace Windows phones, she told the E-Commerce Times. No doubt, its pricing relative to Apple products will be attractive as well.

“Some manufacturers who currently use Android are going to grow increasingly disenchanted with the fact that Google now owns a competing phone company and will divert resources toward Microsoft and away from Android,” said McGrath.

In addition, “Microsoft will leverage its relationships with enterprise and other customers to support the phones,” she added.

What It Must Do First

Windows Phone 7 OS owning the No. 2 perch in the market is not a foregone conclusion, however. Nokia and Microsoft need to focus on switching Symbian OS user allegiances to Windows Phone 7, IDC pointed out.

Growth will also depend on how well the two companies are able to penetrate emerging markets, where Nokia is currently favored, Restivo said.

“It has a strong brand and distribution relationships in these markets,” he pointed out.

Microsoft and Nokia need to win these markets because the battle for market share in developed markets will be much harder, noted Restivo.

“Apple and Samsung have large installed bases in these markets, and it will be tougher for Windows Phone 7 OS to make inroads,” he said.

Other Headwinds

Indeed, Windows Phone 7 is facing some sharp headwinds, at least in the North American market, Ben Piper, president of Ben Piper Consulting, told the E-Commerce Times.

The app factor is one. “Companies that create apps are already having to create two versions — one for iPhone and one for Android,” he observed. “Unless Windows Phone begins to represent a large market segment, these companies will not develop for it. And if apps for Windows Phone are limited, most smartphone users will not even consider it.”

Another is the BYOD (Bring Your Own Device) to work trend, Piper continued.

“Companies that are allowing employees to use their own devices to access company resources are already supporting iPhone and Android,” he pointed out. “There is no longer any need for businesses to adopt or support the Windows Phone platform. If companies won’t support Windows Phone, there is disincentive to start using it.”