Microsoft plans to finally catch up to Google and Apple

In a market where the consumer is always looking for the next biggest and best thing, Microsoft Corp. (MSFT) made the questionable decision to forgo the most cutting edge hardware for its first generation of Windows Phone 7 smartphones.  

I. Microsoft Looks Ready to Finally Cave to Market Demands for Faster Hardware

In an interview with All Thing Digital, Windows Phone unit chief Andy Lees defended the decision.  Referring to the WP7 handsets' lack of LTE (which is featured on a handful of phones [1][2] with Google Inc.'s (GOOG) rival Android OS), he states, "The first LTE phones were big and big (users) of the battery, and I think it’s possible to do it in a way that is far more efficient, and that's what we will be doing."

As for Microsoft decision to solely support single-core handsets and limited the processor selection to Qualcomm, Inc.'s (QCOM) system-on-a-chip (SoC) processors, "They're all single core, but I suspect that they will be faster in usage than any dual-core phone that you put against it, and that’s the point."

To be fair, Microsoft is sort of correct on both counts.  LTE is battery hungry and even Verizon Communications, Inc.'s (VZ) leading network only covers about half of Americans.  And when it comes to the dual-core chips found on the iPhone by Apple,  Inc. (AAPL) and most Android smartphones, typically the dual-core processor is underutilized by all but the most demanding applications.  

Further, dual core SoCs are more power hungry.  And last, but not least Android dual-core smartphones take a small processing hit to run apps on a Java VM, versus WP7's C#/XNA implementation (although this performance hit has lessened with the arrival of just-in-time Dalvik compilation, and with developers adjusting to writing more efficient Java code).

That said, the more powerful hardware has given Android and, to a lesser extent, Apple smartphones a powerful psychological advantage.  After all, an LTE dual-core smartphone sounds a lot slicker than a single-core, 3G-limited model.

Droid Bionic ad
LTE modems and dual-core processors have given Android smartphones a psychological edge, something Microsoft miscalculated, with its "less is more" mentality. [Source: Best Buy]

Even Microsoft seems to be waking up to this fact that customers want big.  Mr. Lees comments, "So, I think that what our strategy is is to put things in place that allow us to leapfrog, and I think that’s how we've gone from worse browser to the best browser, and I think the same is true with hardware."

Microsoft says dual-core Windows Phone handsets are coming either this year or next.  And while he did not explicitly state it, it sounds like LTE remains a possibility in the near future as well.

II. "Windows Phone 8" in the Works

Despite relatively abysmal sales, Mr. Lees is optimistic about Windows Phone 7, insisting it suceeded in its goal of establishing itself as a serious competitor.  He comments, "We're not making specific predictions but I think that our momentum is going to build.  Our first (release) was about mindshare, and really getting the credibility, and I think (Mango) is really about starting to build unit volume and market share."

Microsoft is sticking behind Finland's Nokia, Oyj. (HEL:NOK1V).  Nokia is rather peculiar in that it announced early this year that it would be switching all its lineup to Windows Phone, yet has thus far been far slower than other Windows Phone partners to release hardware, leaving its global lineup in jeopardy.
Nokia Sea Ray
Nokia has yet to release a single Windows Phone 7 handset. [Source: TechNet]

But Mr. Lees, when asked to compare the Nokia relationship to the recent cross-licensing agreement with Samsung Electronics Comp., Ltd. (SEO 005930), showed some love for Nokia, commenting, "I think that the agreement that we have with Nokia, it’s obviously a particularly special one, they’re exclusive to us, and we have a very, very deep partnership, and I think that Samsung is not quite as deep a dependence as the Nokia one, but it’s certainly in that vein."

And Mr. Lees also dropped a tidbit that a new major release of Windows Phone was in the works (Windows Phone 8, presumably), though he wouldn't say when it might arrive.  He comments, "Pace is just incredibly important.  If your pace is too short, then the magnitude of what you can deliver gets limited because of the time it takes to do all of the testing required to ship at very, very high quality. Having said that, what you don’t want to do is just have huge, great long release times where you’re out of the market."

Source: All Things Digital

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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