Microsoft's Windows Phone European Successes Offer a Glimmer

Market share figures suggest Windows Phone is on the rise in Europe but will they prefigure broader gains?

The news that the Windows Phone (WP) smartphone operating system is reaching close to 10 per cent market share in major European markets will be blessed relief for both Microsoft and Nokia’s devices unit, soon to become as one under the terms of their recent acquisition agreement. But the jury remains resolutely out on the question of whether the OS will ever fulfil the pair’s strategic ambition to create a “third ecosystem” in smartphones.

According to Kantar Worldpanel, WP has 12 per cent sales share in the UK sector and 10.8 per cent in France, finally breaking through to double-digit share in large markets after several years of expensive research and development spending backed by heavy marketing. Those numbers are sharply up year-on-year but remain dwarfed by those of Android and iOS, the Google and Apple ecosystems that the Microsoft-Nokia alliance was intended to disrupt.

There’s no doubt that WP is an elegant operating system and that Nokia’s Lumia is an attractive showcase of hardware engineering. However, long-term success will depend on a series of conditions.

The first of these, of course, will be further increasing market share, so that long-term profitability ensues. But a large part of the success here will be dependent on a chicken-and-egg scenario. Pulling in more developers to make more top apps on WP will make the platform far more attractive for buyers, carriers and sellers, but so far many app developers have preferred to focus on the large markets afforded by the Apple and Google camps. Even when apps have been available on WP they have often been late to market, or lacking in the features, and general fit and finish of their counterparts. If Microsoft/Nokia can translate its European successes to North America and elsewhere, then this might be sufficient to attract mainstream ISVs to produce their wares on a tripartite basis.

Another unknown factor is how Microsoft’s capture of Nokia will work out. Closer collaboration was given as a key reason for the deal, but the combination will effectively mean that Microsoft joins Apple as vertically integrated competitor that builds both platform and device. Outside PC peripherals and games consoles, Microsoft is a novice in this world and the acquisition is likely to deter both HTC from extending its support and others from joining the camp. Intriguingly, appointing Nokia’s Stephen Elop as CEO could lead to another mighty push.

Finally, one potential advantage Microsoft might have lies in making WP a stronger element in the Windows ecosystem. It has long been thought that making WP devices more manageable for IT admins and integrated with Office, Xbox and other still-powerful Microsoft franchises would be a big selling point. But evidence of this continuum being a key buying criterion is scant. However, we have seen in the past how the addition of one or two breakthrough capabilities have disrupted the status quo and led to rapid changes in smartphone market share. If Microsoft can pick out a plum from its broader engineering team, who knows what the market after effects will be.

The European numbers are cause for a little optimism but the stark context less so. Today, Gartner suggests WP market share is just 3.3 per cent worldwide and another analyst, IDC, predicts it will be 2017 before the worldwide market share figure edges past 10 per cent. But Microsoft has the wealth to stay in the sector for the long term… and that is probably just as well.


By Martin Veitch, Editorial Director