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Windows Phone handsets moved 2 million units in November and December, despite only being on America's second and fourth largest networks.
Results are rather mixed, and can be viewed either optimistically or pessimistically

There are now over 2 million Windows Phone 7 licenses delivered to OEMs, but what does that mean for Microsoft and the future of this platform?

During Android's first few months on the market it had only a few percent market share, versus Apple and Research in Motion's dominant positions in the U.S.  Now it owns half the market.

Microsoft is clearly hoping for a bit of the same magic.  The company arguably has the most innovative interface on any smartphone on the market today.  While RIM, Apple, and Google all rely on chiclet-style app grids at the heart their GUI (Google, at least, adds animated widgets to the homescreen), Windows Phone 7 offers a striking visual spectacle of animated menus, most of which are timesaving and intuitive.

Microsoft announced this week that Windows Phone 7 moved 2 million licenses in Q4 2010.  That's largely in line with what one might expect, as it indicates that Microsoft sustained the sales pace indicated by previously released figures.  The platform launched on November 8, 2010 and within six weeks (on December 20) had sold 1.5 million units.  

Some were quick to jump on the sales, largely using analysts to hack away at the platform.  Writes Bloomberg:

Microsoft Corp. said it shipped more than 2 million copies of the Windows Phone 7 operating system last quarter, as the company tried to reverse sliding smartphone market share...

The shipment figure isn’t all that rosy, said Kevin Burden, an analyst at ABI Research.

"The number shows there’s a lot of competition in this space and Windows Phone 7 is having a hard time being heard over the crowd," said Burden, who is based in Hopkinton, Massachusetts.

Microsoft defends itself.  In an interview with All Things Digital's Mobilized blog, Microsoft Senior Product Manager Greg Sullivan is quoted as saying, "We’re still in the early stages. When people use this phone, they really, really like it. One of the key ways that we’ll measure success of Windows Phone is did we ship a phone people love."

He says that the 93 percent approval rating the platform enjoys by Microsoft's accounting is proof of a successful mission.  Windows Phone 7 users we have interviewed do appear to echo this sort of positive response.  Virtually every Windows Phone 7 user we spoke to at CES (none of which worked for Microsoft or a phone carrier) spoke glowingly of the platform.

But there's a lot more to this story, both good and bad that is being largely overlooked.

First, Microsoft sales look more impressive, given that it is only currently offered on AT&T and T-Mobile in the U.S.  The good here is that sales will obviously pick up when the new platform lands on America's largest wireless network (Verizon).  The bad news is that Microsoft set a slow schedule for the Verizon and Sprint launches, with no concrete launch dates yet.

Second, like Android, Microsoft is pursuing an aggressive update schedule, which should help it.  It plans to deliver a pair of major updates this spring, which will bring customers copy/paste and multi-tasking.  These updates will "catch it up" with its competitors, so to speak.  This is definitely a positive for Microsoft, and should greatly help the platform's image.

A less than positive note, however, is the phantom data problem.  Microsoft claims the problem, in which phones transmit large amounts of data (tens to hundreds of megabytes of data daily -- or more) is limited to a "single digit" percentage of users.  Yet it has failed to act responsibly and warn users, allowing them to remove the offending program.  It has also failed to provide users with sufficient reassurances that they will not be charged with data overages.

Speculation is running wild about what the offending program may be, following Microsoft identifying it as a third party solution.  One report accuses the HTC Hub of being responsible for the phantom menace; others have accused Yahoo! Mail.  Overall, this problem and Microsoft's poor response are dual negative marks for the platform's image.

So with all this mix of good or bad, what is the outlook for the platform?  Well, ultimately Windows Phone 7 has an increasing array of handsets, and its sales aren't that bad, so we expect the platform to survive and slowly gain market share.  Still, how fast it gains market share is largely dependent on how well it delivers on platform updates and whether it chooses to start acting responsibly about its platform's data issues.

Update: Thur. 1/27/2011 2:50 p.m. -

We reached out to our Microsoft press contact for more information concerning some news networks' negative depiction of this sales data and update on the phantom data issue.  While the spokesperson did not provide us with answers to our specific questions, as requested, they did offer us a general statement.  

They emphasized the following metrics:

• Early research indicates 93% of customers worldwide are satisfied with Windows Phone 7, and 90% would recommend to others.
• Developer engagement is excellent with customers getting access to an average of 100 new apps a day and more than 6,500 apps overall on Marketplace.
• Over 2MM licenses sold to OEMs worldwide. 

And they add, "Sales are an important measure of success, but for a new platform customer satisfaction and active developer investment can be even more important leading indicators of long-term success.These early signs of satisfaction from customers and developers are reason to be bullish about the foundation for long-term success for Windows Phone 7."

We will again, try to provide an update as soon as Microsoft offers more specifics on the data usage issues that are afflicting some WP7 users.

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the article i read mentioned win7 phone licenses
By RamarC on 1/27/2011 10:23:39 AM , Rating: 2
not actual hardware sales. so i expect some of that 2M figure to be on the shelf or in manufacturing inventory and not in people's pockets.

By Shadowself on 1/27/2011 1:07:32 PM , Rating: 2
Exactly. These are sales of *licenses* to OEMs. These are not physical items at all. They are not sitting on the shelf. These are *anticipated* sales of hardware by those OEMs because they would not have bought the licenses if they did not think they'd eventually make the sale of the hardware into which it will be installed. They may be buying licenses 10 days in advance of anticipated hardware sales or they may be buying licenses six months in advance of hardware sales. These are NOT sales of units to end users.

RE: the article i read mentioned win7 phone licenses
By Taft12 on 1/27/2011 2:25:04 PM , Rating: 2
Exactly. These are sales of *licenses* to OEMs. These are NOT sales of units to end users.

Moreover, there is not a whisper about ACTUAL end-user sales. There's a reason for this. The news is not "mixed", it's "catastrophic".

By semiconshawn on 1/27/2011 6:43:49 PM , Rating: 2
Please post your source for these catastrophic sales figures. Hard data please.

By Taft12 on 1/28/2011 10:37:58 AM , Rating: 2
Refusal to provide hard data (while trumpeting a number that means nothing) speaks volumes.

Then there's this hilarity from Mick's update:

Sales are an important measure of success, but for a new platform customer satisfaction and active developer investment can be even more important leading indicators of long-term success

"Come on guys, sales numbers aren't THAT important. Really! Guys? Hello...?"

By robinthakur on 1/28/2011 6:33:28 AM , Rating: 3
I'm surprised that the original article didn't pick up on this to be honest. How many people do you know that has actually bought and kept a Windows phone? This shoudl tell you all you need to know about how well it's doing. Whilst things might be different in the US, in the UK, I saw one for the first time on the tube the other day, and it's been out since December. I'm into phone technology so I would notice them around, but the only place i've seen them are in adverts, whereas by contrast 99% of people seem to have an iPhone.

I honestly think that most people seem to still associate them with the old Samsung Omnia's and HTC HD's i.e. an compromised experience which paled compared to everything since the iPhone in 2007. This assumes that they even know Microsoft makes phones still, which most people don't. By contrast, everybody and their dog knows what Kinect is, so I would say that it is a failure to market properly given MS's stated claims about its popularity with users (presumably outside of Redmond...)

I think it trades too heavily on its OS appearance being different, when that isn't really a killer feature anymore (it's been done). Most people don't like such radical change in the way they use a device. Faced with something not intuitive a great majority of people just give up on it...unfortunately.

By MozeeToby on 1/27/2011 6:02:58 PM , Rating: 1
Not to pour gas on the fire, but you probably shouldn't forget the fact that every MS employee was given a free Windows 7 phone. That's 87,000 right there, or almost 5% of the licenses that MS has sold to date. If you figure that only half those licenses have been used you might be looking at close to 10% of the Windows 7 phones in the wild being gifted by MS to their employees.

Maybe there is room for some optimism but to me the picture is... bleak.

By semiconshawn on 1/27/2011 6:53:17 PM , Rating: 2
once again pure speculative bull caca. First off you dont know that the 87k internal even counts as licenses sold. Second you have no idea how many licenses have been used total. So now you have flawed data and a flawed equation and yet you still come up with an answer you put faith in and want to share with others?

By robinthakur on 1/28/2011 6:44:10 AM , Rating: 2
I would say that it is you who are being a bit of a fan boy here. Whilst this data is not available (you are correct) Those with enough experience can sniff out the PR spin in MS's statement, masquerading as transparency. While none of it is a bare faced lie, it gilds the truth beautifully. The truth is that they have shipped x number of handset licenses, but have released no real sales figures. If sales were good, what practical utility would this serve? If you *sold* a huge number of handsets, tell everybody and build the brand, give confidence to developers etc. This is MS buying themselves time to try and rescue the situation before it becomes yet another failed consumer platform.

Unfortunately the fear of buying into a possibly failing unproven platform combined with a weak economy is likey to scare off a large number of potential purchasers and make hem choose a safe option, and I've seen no evidence that business is buying into the platform as they should, because they perceive it as being far too consumer focused.

The only legitimate reason I can think of is that they are waiting for complete sales data to come back from retailers, but come's been two months now!

If you want to support MS, just buy a Windows 7 handset...! They need your money, not your vocal forum support lol

"A lot of people pay zero for the cellphone ... That's what it's worth." -- Apple Chief Operating Officer Timothy Cook

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