IDC has good news and bad news for Microsoft’s smartphone ambitions.
First, the bad news: four years from now, Google’s Android and Apple’s iOS will still be eating Microsoft’s lunch in the smartphone market.
The Windows Phone operating system will account for just 5.6% of global smartphone sales in 2018, IDC said Monday in the data researcher’s latest forecast. That’s well short of the 15% share Microsoft executives said they were shooting for when they bought Nokia’s handset business last year.
The good news: 5.6% represents a near doubling from the 2.7% share IDC currently estimates for Microsoft. Getting there assumes an annual growth rate of north of 30% every year.
The question is whether that growth will be enough to push the phone hardware business from a cash burning former acquisition to a profitable unit with a long-term place in Microsoft’s lineup of products. Microsoft executives have said they hope to have the phone business, the target of hefty cost cuts and layoffs this year, at least breaking even in the fiscal year that starts next July.
IDC researcher Melissa Chau said there’s something of a price war developing in the mid- to lower-tier smartphone category that Microsoft has been targeting. Phone manufacturers, particularly in the emerging markets like China and India that account for most new smartphone users, are offering smartphone features at a cost approaching those of more basic mobile phones.
“We are seeing increasingly better specs in more affordable smartphones,” Chau said. “The biggest question now is how much lower can prices go?”
Microsoft would like to turn a profit on its mid-range phone. Also embedded in its bet is the hope that Microsoft can build enough consumer loyalty to the nascent Lumia brand that phone buyers stick with a Windows phone as they graduate from basic phone to smartphone, or smartphone to high-end device. Ideally for Microsoft, they’d pay for services like Office or data storage, too.
Brent Thill, an analyst with UBS, said Microsoft’s strategy of targeting the budget smartphone consumer was the right one. It also avoids an expensive direct clash with Samsung and Apple at the top end of the market.
“They have to be in consumer [markets] in the right places, where they can win,” Thill said of Microsoft. “You don’t want to offer an overlapping phone with Apple. You’re not going to win.”
See IDC’s full forecast below:
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IDC sees Windows Phone share doubling, but behind Google, Apple
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