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The inevitable Microsoft smartphone

Will Microsoft follow up its just-launched Surface RT tablet with a smartphone it can call its own? The growing importance of building a competitive platform strategy in a fast-evolving mobile market makes it all but inevitable.

It's easy to see why Microsoft, after decades of limiting its PC-based hardware offerings to peripherals like keyboards and mice, would jump head-first into the self-branded waters. The market is growing too fast to ignore. IDC says 179.7 million smartphones were sold worldwide last quarter, 45.3 per cent more year over year. In the U.S., comScore says 119.3 million people — or 51 per cent of the market — owned smartphones as of the end of September.

The feature-phone-to-smartphone changeover is accelerating, as that figure is up 8 per cent over the previous quarter. With growth picking up and close to half of all consumers yet to buy their first smartphone, there's more than enough room in the market beyond Apple's iOS and Google's Android, which according to IDC now account for 75 per cent  and 14.9 per cent of all smartphones shipped.

Indeed, IDC predicts a rosy future for Microsoft, with Windows Phone growing from 5.2 per cent market share this year to 19 per cent - second place ahead of iOS — by 2016. The research firm projects Android's market share will settle back to 52.9 per cent by then, with iOS slotting in at 19.0 per cent. RIM is expected to round out the top four with 5.9 per cent, compared to 6.0 per cent this year.

Change is needed

As promising as future market conditions are, Microsoft will need a radical shift in thinking to succeed where it's previously failed. Its existing model of relying exclusively on hardware vendors may have worked for much of the personal computer age, but as the market shifts from PCs to mobile devices, leaving so much of its brand potential in the hands of others is a risky business. Earlier efforts like Windows CE, Pocket PC and Windows Mobile failed to catch fire as hardware partners simply weren't focused on Microsoft-powered smartphones. Or, in some cases, on smartphones at all.

PC-centric HP and Dell still haven't figured out the smartphone formula, with their earlier mobile offerings falling prey to the same kind of misplaced value-add that's turned their PCs into flat-selling commodities. As loyal as they have been over the years, they aren't doing Microsoft any favours as it focuses on rebranding Windows. They load the average PC down with preinstalled bloatware — thinly shielded ads for apps and services, "lite" versions of otherwise useful software, and related toolbars and widgets that clutter the desktop and cripple system performance — that annoys consumers, hinders business use and hides the full utility of the underlying operating system.

If it's a frustrating experience on a laptop, it's a downright dealbreaker on a smartphone, where snappy performance and streamlined workflows are critical. The Surface RT and upcoming Surface Pro are already helping Microsoft build a foundation in the relatively immature tablet market, but it's the more evolved smartphone space where Microsoft stands to have an even stronger near-to-medium-term impact.

A path well worn

Google, whose initial strategy for Android followed a similar partnership-based model, is now accelerating its own self-branded hardware effort, with its Nexus 4 phone and Nexus 7 and 10 tablets. Although its $12.5 billion acquisition of Motorola Mobility last year was viewed by some as a means of bolstering its in-house hardware capability, recent Nexus-branded devices have been built by LG (Nexus 4), Asus (Nexus 7) and Samsung (Nexus 10). Whatever Google's plans for Motorola and its existing base of hardware-partners may be, the company isn't afraid to compete with companies it once directly supported.

Likewise, Microsoft has no delusions, now or ever, of shoving HP, Dell, Toshiba, Nokia or HTC out of its evolving Windows and Windows Phone ecosystem. Just as Google uses its Nexus devices to market a high-end, uncorrupted Android experience, a Microsoft-branded smartphone as a halo device gives the software vendor a powerful base from which to sell the Windows Phone brand. The Surface was Microsoft's first shot in serving notice it intends to control its own platform destiny, but it won't stop at tablets.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own.