Microsoft Corp. (MSFT) plans to bring its Windows Phone software to 23 new countries and put the operating system on less expensive smartphones, part of an effort to win back market share lost to Google Inc. (GOOG) and Apple Inc. (AAPL)
Microsoft will kick off the expansion by opening mobile- application stores in China, Thailand, Venezuela and 20 other nations by the end of the month, with phones arriving around the same time, said Terry Myerson, who oversees the company’s Windows Phone business. That will bring the total number of markets Microsoft serves to 63, letting it target 60 percent more buyers, he said.
The company aims to close ranks on Apple, the No. 2 provider of mobile-phone software, and set up a showdown with Google’s market-leading Android operating system. While research firm IDC has predicted that Microsoft will leapfrog Apple by 2015, moving up in the ranks won’t be easy, Myerson said.
“I wish all I had to do is press a button and say, ‘Make it happen,’” he said. “We’ve got some great strategies to get there, but it’s not a gimme. We’re a challenger in a market against two established competitors.”
Google and Apple aren’t as entrenched in emerging markets, which provides an opportunity for Microsoft, said Al Hilwa, an analyst at Framingham, Massachusetts-based IDC. Global smartphone sales will top 1 billion units in 2015, with China as the biggest single market, the research firm estimates.
Still, Microsoft will have to move quickly in developing economies, where cheaper Android phones are gaining a foothold, Hilwa said.
“That opportunity may be fleeting in that we are seeing a lot of Android phones come down to the low end,” he said. “They need more phones, more carriers, more prices, more languages.”
Microsoft also released a test version of its first Skype video-calling application for Windows Phone today at the Mobile World Congress show in Barcelona, Spain. The company plans to have a final version available in April.
Rather than make phones itself, Microsoft supplies its software to Nokia Oyj (NOK1V) and other handset manufacturers. Those partners are working on phones with Microsoft’s latest operating system and showed off new models today at the Barcelona conference. The company added app stores in Argentina, Indonesia, Malaysia, Peru and the Philippines earlier this month to help support the phones.
Nokia announced plans today to sell a Windows Phone priced at 189 euros ($254) in the second quarter running on the new software. That’s 30 percent less expensive than Nokia’s current cheapest Windows Phone.
Microsoft has adapted Windows Phone software so that it requires half as much memory and runs the cheaper 7X27A chip from Qualcomm Inc. (QCOM) That should help manufacturers cut their costs by about 30 percent to 40 percent, Myerson said. New Windows Phones could cost as little as $100 to $200 to make.
In the U.S., those savings are unlikely to be passed along to consumers, Myerson said. In emerging markets, though, the changes should lead to cheaper phone prices.
“For Windows to be relevant and exciting to consumers in these countries, we need to be at the price points they buy consumer electronics at,” he said.
Phones based on the new software and cheaper hardware are slower for certain uses, Myerson said. A small number of apps also aren’t yet running on the new products, though Microsoft is working to fix that, he said.
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The effort is particularly important in China, where many phones cost about $100 to $150 to make, Myerson said. The country is poised to pass the U.S. as the biggest smartphone market this year, with Android ranking as the most popular software, according to IDC.
“What Microsoft is counting on is there are a lot of Android users, but there aren’t a lot of Android lovers,” said Michael Gartenberg, an analyst at Stamford, Connecticut-based Gartner Inc. “They think they can convert those people.”
Microsoft also is working to persuade more carriers to offer prepaid Windows Phones -- an approach that’s popular in emerging markets. Myerson plans to discuss that topic this week with America Movil SAB (AMX), the biggest mobile-phone carrier in the Americas.
For now, the new software won’t work on handsets that cost less than $100 to make. Still, Microsoft might be able to address that segment someday, Myerson said.
“We want to maintain a consistent level of quality,” he said. “In the fullness of time, price points come down.”
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