Economist on the Mobile Showdown


It's another Nokia vs. Microsoft article (look at the HTML page title), but because it has the Economist's normally snobby British slant that they somehow equate with objectivity, this is a great anti-MS article. ;-)


Having failed to sign up the large handset makers, Microsoft has decided instead to get round them by going directly to their customers: the mobile-network operators, which buy handsets in bulk and sell them to their subscribers. Microsoft is able to do this because a significant proportion of mobile phones (26% this year, according to figures from Strategy Analytics, a consultancy) are made by contract manufacturers, to which handset makers outsource some or all of their manufacturing. Some contract manufacturers, such as HTC of Taiwan, also design products and are known as �original design manufacturers� (ODMs). The SPV phone is a joint venture between Microsoft, HTC and Orange, a European mobile-network operator. HTC designed and built the hardware, Microsoft provided the software, and Orange agreed to buy the phones.


But there are a number of problems with this vision. The main one is that the economics are skewed in favour of the large handset makers, which produce far bigger volumes. Nokia, Motorola and Samsung produce handsets in quantities measured in millions. An operator placing an order with an ODM, in contrast, will order a few hundred thousand handsets at best. With fewer economies of scale, this makes the handsets more expensive.


It is too early to conclude that Microsoft's attempt to by-pass the handset makers will fail. But the omens from its previous joint venture with HTC, a hybrid PDA-phone running Microsoft's Pocket PC software, are not good. Sales of the device, known as the XDA in Britain, the MDA in Germany, and the �T-Mobile Pocket PC Phone Edition� in America, have been slow. A British operator, O2, has sold only 12,000 XDAs since its launch this summer, despite a massive advertising campaign. This may reflect a lack of enthusiasm for PDA-like devices, but it also highlights another problem with the ODM approach: the lack of a strong brand.

I must say that the the MS SPV isn't a bad looking phone at all - having checked out this in depth article over at MobiGeek, and the price is right if you're in the U.K. But it's not Nokia. (I LOVE that pic at the top of the MobiGeek page. I want THAT job!)

It's going to be an interesting year ahead, I think. Microsoft probably has more cash on hand than the net worth of all those "top tier" mobile phone manufacturers combined, so they'll be able to do a lot of damage that way. There's no laws in the U.S. about Microsoft GIVING their phones away to establish themselves now, is there? They'd probably lose a lot less money per phone than they're losing on the X-Boxen right now...

I can't wait for my Symbian books to arrive! Damn this international shipping!


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