Thursday, July 01, 2010

Microsoft's Phone Failures

Microsoft lost its edge years ago. Now it seems to have lost its way.

Last year they introduced the Zune HD. I have one and it is a nice music and video player with the added attraction of touch-screen, a web browser, and a limited selection of apps. Many people felt that this would be the basis of a new Microsoft phone. Microsoft confirmed this earlier this year. They will be launching a new phone under the Windows 7 banner this Fall.

Then they came out with the Kin phones. These amounted to feature phones. They did have a browser built in but otherwise their capabilities were locked-in. They were considered rather deficient and they had nothing to do with the new phones coming out this Fall.

The Kin didn't sell. You can tell that by the advertising blitz that Microsoft launched (although I don't believe the rumor that they only sold 500 units).

Microsoft is supposed to have sunk around $500 million into the Kin effort. Some of it may be salvaged. The phone backs itself up regularly and everything on the phone is available through a web interface. Microsoft promised that the new phone will probably have that capability sometime in the future, just not at launch.

This seems typical of what Microsoft has begun. During the 1980s and 1990s, they evaluated a market then entered it. Their initial offering was seldom very good, the joke was that you should never buy a Microsoft product before it's 3.0 release. By then it was usually on par with the industry leader. From that point, Microsoft would use its leverage to shut out the competition.

For most of the 2000s, they have tried this formula in different markets and failed. Bing is the newest in a string of search engines that failed to attract Google's business. Hotmail has been losing market share for years. Internet Explorer is still the dominant web browser but their market share keeps dropping. At one point they had better than a 90% share. Now they are around 60%.

They also failed at establishing themselves in the music market. They have gone through several services including the ironically named "Plays for sure".

Microsoft has deep resources. It is possible that they can regain their momentum. By all accounts, Bing is a credible search engine and there is some excitement about the new phone. At the same time, the Kin flop has hurt them. It may have soured their relationship with Verizon which will limit their potential market a great deal.

Maybe the real problem is that Steve Balmer need to go.


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