According to Bloomberg Microsoft shipped 2 million units of the new Windows Phone 7 in Q4 2010. Selling 2 million anything sounds like a large amount. And it is, but when you take a step backwards and view the bigger picture you see the real truth. Apple claims they are activating 180,000 new iPhones every day, and Google 300,000! 2 million in three months just doesn’t sound that much anymore. Especially when that 2 million isn’t actually the amount of devices in end users hands, but rather the amount of licenses Microsoft has sold to manufacturers. The actual number of sold devices can therefore be a lot less. It probably also tells something that Microsoft isn’t keen on sharing these numbers with the general public.

Microsoft did a brave thing when they scrapped their original plans for new Windows Mobile OS, went back to the drawing board and came up with WP7. It’s unique, truly beautiful and nothing like the iPhone. Still WP7 doesn’t seem to be selling. It predecessor, Windows Mobile 6, was almost a dead platform at the end. And although WP7 is apparently Microsoft’s seventh operating system, it had to start from zero when it comes to building the ecosystem. As Windows Phone 7 is not backwards compatible.

Microsoft is first and foremost a software company. Their core business is the Windows operating system, which dominates the PC market with 89.7% market share. However the market is slowly transitioning towards more mobile devices. Laptops are already outselling traditional desktop computers. And according to Forrester Research tablets will outsell netbooks by next year and desktops by 2013 in the US. What is Microsoft’s answer? It’s evident that the resource hog Windows 7 is not the best OS for netbooks not to mention tablets.

Microsoft simply cannot afford to lose this battle or else they’ll loose their core business. Microsoft was clearly the underdog when they entered the gaming industry with the original Xbox. Overtime and with deep pockets the company managed to capture the market from such veterans as Nintendo and Sony. Who’s to say the company can’t do the same with WP7? WP7 is a much more important product for Microsoft than the Xbox ever will.

There is also another battle that often gets overlooked. Linux/Unix Vs Windows. The situation in the mobile market is completely the opposite of the PC market. Linux/Unix rule the mobile market: iOS, WebOS, MeeGo and Android are all based on it. For Windows, with only 4% market share, the situation seems hopeless. Some “analysts” have suggested that Microsoft could dump WP7 and adopt MeeGo. This is delusional and will never happen! Microsoft is all about Windows. For heaven’s sake this is a company whose CEO compared Linux and the open source movement to a cancer!

Qt on the other hand might be more reasonable. Microsoft, like Android and Symbian, has suffered from the lack of quality applications and developers compared to iOS. Windows Mobile 6 already supported Qt and Google has used Qt before. Could it be possible for all the three giants Google, Microsoft and Nokia to team up to encounter Apple on the app front? Is this the ecosystem that Nokia’s Elop has been hinting about?

Microsoft needs to keep expanding its current portfolio to new platforms and at the moment that means smartphones and tablets. The company already has a strong ecosystem to build on: Windows, Office, Bing, Zune, Xbox, Messenger, Hotmail etc. Yet, for some reason Microsoft hasn’t been able to build a successful mobile OS from these building blocks. But they are making progress. Microsoft still has time (some) and almost endless amounts of cash at its disposal. Microsoft’s future depends on their ability to bring Windows (among other products) to mobile devices. Thus, it would make a lot of sense for Microsoft to team up with someone else. And who’d be better than Nokia, the market leader (Apple and Google are behind burned bridges). Collaboration between these two companies would be a jackpot especially to Microsoft. When it comes to smartphones and tablets, Microsoft is the underdog.

Microsoft’s mobile strategy – Part 1: Does it exist and if so, how is it doing?

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