Report: Microsoft's smartphone shipment goals face "uphill battle"

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Aug. 12, 2004

In a recently released report, analyst firm Research & Markets says that handsets based on "full-feature operating systems" such as Windows Mobile, Palm, and Linux represent the next stage of the market for mobile handsets. These next-generation handsets will provide significantly greater design flexibility, ease the process of launching new mobile interactive services, and put new advanced computing capabilities in the pockets of users, the report says.

Key findings of the report include:

Devices based on full-feature operating systems will define the next stage of technology evolution in the mobile handset market. Sales of full-feature handsets will grow to about 290 million [devices] in 2008, or 42.5 percent of all handsets, from about 10 million in 2003. Sales will be driven by falling components costs that will result in full-feature handsets at manufacturer price points of about $180 in two years and $120 in 2008.
While Symbian will be the market share leader in the next 24 to 36 months, thanks to its endorsement by market makers Nokia and NTT DoCoMo, Linux will threaten for long-term dominance. Linux leads other platforms in openness and low cost -- factors that are essential to success in a market defined by tight margins, rapid innovation, and standards adherence.
Microsoft will face a severe uphill battle to succeed in its stated goal of achieving global shipments of 100 million devices based on its platform in 2007. While Windows will provide advantages for OEMs in the productivity device segment, Microsoft will have a tough time defining new hybrid device categories and matching the innovation of more open platform ecosystems.
By distributing full feature handsets, carriers will create new service opportunities but will also create new competitors. The proliferation of full feature handsets with flexible I/O will yield new channels for providers of handset features and content publishers using OTA download, PC synchronization, or retail distribution via memory cards.
The proliferation of full-feature devices will create a major new venue for content piracy. Pirates will be attracted by the ease of distributing to open platforms and the higher production quality supported on full-feature handsets. Tighter DRM will help but will not totally defeat pirates and others who will test the legal bounds of fair use of digital content.
The use of full-feature operating systems will yield markets for hybrid devices including handsets that are optimized for productivity, imaging, game play and music consumption. Leading providers of mobile devices will be forced to respond by touting improvements in core functionality and facilitating WAN transmission via a Bluetooth-bridge or through direct integration of cellular modems.
Some manufacturers for market segments that lack the interest in, or financial ability to subscribe to, data services will view full-feature platforms as overkill. Full-feature platforms will be competitive with embedded OSes such as Nucleus or ITRON in design wins for devices that will represent 50 percent of market shipments in 2008.
While vendors highlight support for device middleware such as Java, developers will shift their focus to develop natively for full feature OSes as their installed base grows. Developers will be attracted to consistent implementation, higher performance and less restrictive native platforms.

More information on the report, "Defining The Market For Full-Feature Handsets," is available at the company's website.

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