Microsoft knows that it cannot compete directly in the smart phone OS marketplace. If you need any real proof of this just look at the sales numbers and the adoption rates of iOS and Android over Windows Pone in the business market. The problem is that Microsoft did not innovate fast enough as the market shifted. They had the leading product, but once there was real competition in the form of iOS and Android they failed to capitalize on it and instead embarked on a series of products that hurt them very badly dropping them down to a low of just under 2% for market share.To combat this Microsoft has looked for the weak kids on the block and offered to help them in return for their loyalty. They did this with HTC and Nokia and now are doing it with RIM. As we mentioned in an earlier article Microsoft is potentially eyeing both companies for eventual purchase. The reason they need to go to these extremes (and even more so now) is that Microsoft has a habit of abandoning partners when it suits them.
We have already told you that we do not feel that Microsoft was acting out of disappointment with their partners when they released the Surface. This was about ego, getting the jump on Google and Apple as well as testing the waters for continued products in this area. To do this they basically thumbed their noses at their tier one partners. This also has had the added effect of eroding consumer confidence in those brands. Many are now wondering, “if Microsoft does not trust their partners, why should we?”
However in the mobile phone market Microsoft does not have what it needs to build and market a phone. They still need those exclusive deals and the 1-4 phone models that companies like HTC, Samsung and LG will still put out this year. However they also know that the release of Surface hurt them in terms of loyalty from their manufacturing partners. They are going to be less inclined to build products for Microsoft knowing that they might end up competing with them. We know that LG decided not to make a Windows RT tablet and are now hearing that HP will not be making one either (instead focusing on x86 where they will have a 3 month lead on Microsoft). Nokia is already hinting that they have a backup plan incase Microsoft abandons them or Windows Phone is a flop.
This leads us to RIM. Microsoft is trying to get a deal inked with them very quickly to make Windows Phone 8 the core OS for RIM. This will give them two exclusive manufacturers and allow them to shore up their defenses in the event that their partners drop them because of their (Microsoft’s) actions. The deal (depending on the details) could also leave certain doors open for a purchase at a later date.
Microsoft is playing a dangerous game right now with their existing partners and the end state of it is not completely clear. The way things are starting to shape up is not looking good for anyone but Microsoft and that includes the consumer.
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