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Missing out on the world's biggest market is a blow to Microsoft

China recently surpassed the U.S. to become the world's biggest smartphone market.  The Chinese market is a bit like the U.S. market -- Google Inc.'s (GOOG) Android operating system is on top with a dominant 58 percent market share.  Some players are doing a better job in China than eleswhere -- Nokia Oyj. (HEL:NOK1V), for example, owns a 23 percent stake of the lucrative Chinese market despite floundering in the U.S.

Microsoft Corp. (MSFT) is an example of the opposite extreme.  Whatever small success it has seen in the U.S. smartphone market is nonexistent on the Chinese market, because Microsoft hasn't bothered to launch Windows Phones there.  

Originally Windows Phones were expected to launch in China sometime H2 2011.  But as the final month of 2011 slides by, Microsoft has officially punted that launch until 2012. The delay is a costly one for Microsoft, as it could have benefited from the open-minded Chinese consumers, many of whom are buying a smartphone for the first time.

Speculation is that Microsoft either was unsatisfied with its localization (e.g. character representation, local services, etc.) or that it was unable to iron out plans with its patners in the region.

Microsoft is reportedly in negotiations with China-based ZTE Corp. (SHE:000063), Huawei Telecommunications Comp., Ltd., and Lenovo Group, Ltd. (HKG:0992).  China's Lenovo group is the fastest growing PC maker in the world.

If there's one piece of good news, it's that Nokia's strong market share virtually guarantees Microsoft a decent piece of the pie when it enters the market in 2012 -- around the same time Nokia plans to advance plans to phase out Symbian and phase in Windows Phone 7 worldwide.

Windows Phone is faring only slightly better in the U.S. than in China in sales, given how low its U.S. sales are.  Microsoft has vowed to change this via better carrier incentives to sell Windows Phones, trying to match the tactics of Google and Apple, Inc. (AAPL) who typically give tidy commissions to sales people who sell customers on their top handsets.




"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg






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