Microsoft Reveals New Mobile Strategy: Avoid Apple’s Market Segment

Source: ThinkstockMicrosoft (NASDAQ:MSFT) unveiled a new smartphone market strategy at the start of the Mobile World Congress in Barcelona, reports Bloomberg. Rather than trying to dislodge Apple’s (NASDAQ:AAPL) iOS or Google’s (NASDAQ:GOOG) Android operating systems from their entrenched positions in the high-end segment of the smartphone market, Microsoft will instead try to first build market share in the low-end segment. According to Bloomberg, Microsoft executive Joe Belfiore announced that the company would team up with chipmaker Qualcomm (NASDAQ:QCOM) in order to develop basic chipsets that will allow other phonemakers to create low-cost devices powered by the Windows Phone operating system.

As part of its initiative to partner with more low-cost device makers, Microsoft will be adding support for “dual SIM” devices that are especially popular in China, reports Barron’s. Microsoft is hoping that this will entice more Chinese white-label phone makers to preinstall Windows Phone on their devices. “We are open for business on Windows Phone to anyone who wants to build a Windows phone,” said Microsoft Vice President of OEM Sales and Marketing Nick Parker per Barron’s.

Although Microsoft’s Windows Phone holds a negligible portion of the overall mobile operating system market, the company boasted that it had surpassed BlackBerry (NASDAQ:BBRY) as the third-largest OS. “We’ve overtaken BlackBerry to become the third major ecosystem,” announced Microsoft at the Mobile World Congress according to Barron’s.

According to data from market research firm Gartner, Apple’s iOS and Google’s Android combined accounted for a 94 percent share of the worldwide operating system market in 2013. On the other hand, Microsoft accounted for a 3.2 percent share.

Belfiore noted that Windows Phone is actually ahead of Apple’s iOS in ten markets around the world. However, he also admitted that the U.S. market has been “tough,” reports Barron’s. According to data from comScore, Microsoft’s Windows Phone only held a 3.1 percent share of the U.S. smartphone operating system market during the three-month period ending in December of 2013. This was a decline from the three-month period ending in September, when Microsoft held a 3.3 percent share.

Microsoft’s Windows Phone strategy announcement comes as the company is in the process of completing its $7.2 billion acquisition of Nokia’s (NYSE:NOK) mobile division. According to a “person familiar with the matter” cited by Bloomberg, Microsoft may continue selling phones with Nokia’s own operating system in the low-end market segment until its low-cost Windows Phone business takes off. Nokia already uses Microsoft’s Windows Phone operating system for its high-end devices.

However, for now it appears that Microsoft is surrendering the high-end smartphone market to more established rivals like Apple and focusing instead on the rapidly growing low-end segment of the smartphone market. “We’re in this situation where we have to grow where we can, which grows the health of the ecosystem,” noted Belfiore according to Barron’s.

Follow Nathanael on Twitter (@ArnoldEtan_WSCS)

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