Sep 05, 2013

    Apple-like revival for Microsoft?

    WITH its purchase of Nokia's phone business, Microsoft is taking a leaf out of Apple's playbook by bringing hardware and software under a single roof, where they can be woven together more elegantly.

    But Microsoft already bears a striking resemblance to Apple - the Apple of two decades ago. The US$7.2-billion (S$9.2-billion) Nokia deal is unlikely to change that and catapult Microsoft up the ranks in the smartphone market.

    That is because Microsoft - with its Windows Phone operating system - is stuck in third place in that market, where all the oxygen has been drained by more established players.

    Apple and Google have won the hearts and minds of developers, who design the apps that woo consumers to their devices, while Samsung is the dominant maker of mobile phones, most of which run on Google's Android operating system.

    "What matters is not the phone per se, but a dynamic app and services ecosystem," said Mr Brad Silverberg, a former senior Microsoft executive who is now a venture capitalist.

    Microsoft's predicament is a flashback to the situation Apple found itself in during the early 1990s.

    At that time, Apple arguably had a superior computer product, the Macintosh, but it languished as PCs running on Microsoft's Windows operating system dominated the market. One of the biggest problems for Apple then was that Microsoft had succeeded in gaining the allegiance of software developers, who produced a bounty of applications for Windows.

    Unlike some companies - like BlackBerry - that have missed technology shifts, Microsoft still has vast financial resources that could give it a lot of room to develop a mobile strategy that produces results. Because of the huge profits it makes from its flagship software business, "Microsoft has choices most companies don't", said Mr Bill Whyman, an analyst at ISI Group.

    Nokia remains the second-biggest maker of mobile phones in the world when inexpensive feature phones are included. The company has footholds in large emerging markets like India, which could eventually move towards smartphones.

    Microsoft chief executive Steve Ballmer said that the Windows Phone OS has emerged as a "clear No. 3" in smartphones.

    But that is far from No. 1. Microsoft's software ran on 3.7 per cent of the smartphones shipped during the second quarter, compared with 13.2 per cent for Apple and 79.3 per cent for Android.

    "They're making something arguably very well designed, but it doesn't matter," said Mr Benedict Evans, an analyst with Enders Analysis. "I think they're late."