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February 19, 2003--In this issue:
1. NEWS AND VIEWS
- Smartphone Market Heats Up, But Is It Too Late for Microsoft?
- Microsoft Claims Xbox Success
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- Join the HP & Microsoft Network Storage Solutions Road Show!
3. CONTACT US
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(contributed by Paul Thurrott, [email protected])
* SMARTPHONE MARKET HEATS UP, BUT IS IT TOO LATE FOR MICROSOFT?
Microsoft unveiled several Windows Powered Smartphone initiatives this week in a bid to retain interest in the company's flagging cell-phone wares, although the market might have already decided to exclude the software giant as entrenched competitors move ahead with products and services that already outstrip what Microsoft hopes to offer. Microsoft announced that it will deliver Pocket MSN, a feature-rich mobile data service optimized for Pocket PCs and Smartphones. Pocket MSN will provide always-on access to MSN email, Instant Messaging (IM), and other online services; various service carriers, including T-Mobile, have signed on to deliver the service in Europe. Microsoft also announced a partnership with Intel to deliver a Smartphone concept design for hardware makers. Based on the Intel Personal Internet Client Architecture (Intel PCA), the design gives phone manufacturers a good starting point for next-generation phones with a 176 x 220 pixel color screen, Xscale processor, integrated camera, and 5 hours of talk time. Microsoft and Samsung Electronics also unveiled the new Windows Powered Samsung Mobile Intelligent Terminals (MITs) SGH-i700 Pocket PC for Global System for Mobile Communication (GSM) and General Packet Radio Service (GPRS) networks, a Pocket PC device that features cell-phone capabilities.
Unfortunately for Microsoft, the company has rarely performed well in markets in which it couldn't leverage its PC monopoly--its high-profile failures in interactive TV is an obvious example--and the cell-phone market is already well established with numerous hardware and software makers and service carriers. Microsoft's entry into this market has been rough at best, and some of its onetime partners, such as Sendo, have bailed from the Smartphone platform and gone on to strike up partnerships with Microsoft competitors. Other cell-phone makers already offer similar features in their non-Windows phones, and those devices are available through a variety of service providers. Multimedia provider RealNetworks announced a deal this week to share its technology with Swedish wireless-phone maker Telefon AB LM Ericsson, and cell-phone maker Nokia recently said that it will work with Oracle to create mobile email solutions. IBM is working with several companies in the market, and even Microsoft partner Samsung has plied the competitive waters with a 5 percent investment in phone-software maker Symbian. (When Reuters asked San-Jing Park, Samsung's head of mobile handsets, about his company's work with Microsoft competitors, he said that Microsoft "took all the value and left hardware makers as \[Smartphone\] clone producers.") Siemens is another Microsoft partner that works with non-Microsoft technologies for some of its products.
In the highly competitive market for next-generation cell phones, backing Microsoft might not be such a solid bet. In fact, it might just be a sure-fire failure. After years of work creating software and hardware reference designs, Microsoft has had precious little success beyond some adoption in Europe. I don't think this week's announcements will be enough to turn the tide.
* MICROSOFT CLAIMS XBOX SUCCESS
Microsoft announced today that the Xbox, the company's struggling video-game system, experienced better-than-expected sales in January, cementing its number-two position in the market ahead of Nintendo GameCube but still significantly behind market-leader Sony's PlayStation 2. The company noted that Xbox sales in North America are especially strong, giving the company 24 percent of the market, double that of GameCube. But that 24 percent is only about one-third of Sony's North American market share.
"It's always nice to know that gamers agree with us in thinking that Xbox is a fabulous machine and a great entertainment value," said Robbie Bach, senior vice president of Microsoft's Games Division and chief Xbox officer. "After 15 months on the market, we're right on target with our business plan and will continue to provide the best interactive experiences possible."
Xbox continues to rack up more software sales per video-game unit than the competition--an average of 4.9 titles per console--and this statistic has always been a highlight for the system. And sales of the system's online package, Xbox Live, have also been strong; Microsoft says it sold 44 percent more Xbox Live Starter Kits than Sony has sold PlayStation 2 Network Adapters during their respective first 3 months on the market.
Despite Microsoft's positive stance, however, the Xbox can hardly be called successful. Microsoft has twice reduced sales expectations, and the company now expects to sell about 10 million Xbox units by mid-2003, about a year later than originally projected. However, the system's sales failings probably were unavoidable because of the overwhelming success of the PlayStation 2, which is the fastest-selling video-game console of all time. From a technical standpoint, the Xbox is superior to the competition, but both the Xbox and the GameCube suffer from smaller developer bases than the PlayStation 2. The big question going forward is how long Microsoft will float its money-losing video-game console. The hotly contested video-game market has never had more than two major players, and how long the two stragglers--Microsoft and Nintendo--can continue to grasp at an ever-decreasing share of the market is uncertain.
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