As Nokia’s Windows Phone bet falters, there’s one last hope

Here’s a scary statistic: There are twice as many Windows Mobile smartphone users in the United States as Windows Phone users — despite the fact that Microsoft ended development of Windows Mobile two years ago. Nielsen Media reports that 3 percent of smartphone subscribers run Windows Mobile versus just 1.3 percent for Windows Phone. IDC and Gartner figures are even worse, with about 2 percent share combined for the two Windows smartphone OSes; neither firm bothers to distinguish between Windows Phone and Windows Mobile users, given their lack of market penetration.

Another scary revelation: Nokia’s Lumia smartphones, which run Windows Phone 7, sold only 330,000 units in the United States in their four months on the market despite Nokia’s prior claims of “strong” sales. Compare that to estimates of at least 1 million for the Samsung Galaxy S III in its first week. The Lumia was supposed to be Nokia’s ticket back to relevance; instead, it is a flop despite a stylish case design. Sadder still, Nokia isn’t the top Windows Phone seller in the states; Samsung with its Focus S has nearly double the sales of Nokia for Windows Phones, and HTC has nearly as many as Nokia.

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Windows Phone sales were put in short-term danger a few weeks ago when Microsoft announced that Windows Phone 8 — the first business-compatible version of its smartphone OS — won’t run on existing Windows Phone 7 devices. Anyone interested in a Windows Phone is now likely waiting until Windows Phone 8’s fall debut, when iOS 6 will have made its debut.

The acknowledgment of the long-rumored Windows 8 just a few months after the Lumia’s U.S. debut made Nokia’s situation even more precarious. In early 2011, its new CEO (who hails from Microsoft) bet the company’s future on a switch from its failing Symbian OS and its planned Maemo and MeeGo OSes — three OSes Nokia screwed around with until it was too late — to the then-untested but imminent Windows Phone. Symbian, Maemo, and MeeGo were clearly dead ends for Nokia, and now Windows Phone may turn out to be one as well. Nokia’s only other realistic choice was to become an Android vendor, an option that is no longer that viable, given how Samsung dominates that market and HTC and Motorola are scrapping hard for the remaining portion.

Who uses Windows Mobile? Mainly government employees via old smartphones. In the old (pre-iPhone) days of mobile, Research in Motion’s BlackBerry ruled the smartphone market share, but Windows Mobile had a strong following because it could run more applications and it offered strong security and management capabilities that government agencies and regulated industries want. Windows Phone 7 lacks those management and security features, and the BlackBerry failed to adapt to the new era of mobile computing; such customers either had to switch to iPhones or stick with Windows Mobile.

Governments also move slowly; plus, their budgets work in a way that they’re experiencing the worst pain of the recession in 2011 and 2012, making it harder to justify new smartphones. In fact, some governments, such as the state of California, have stopped buying smartphones and are making employees bring their own.

Windows Mobile’s market share is a legacy that should drop dramatically in 2013 and 2014. The questions remain: Will those users switch to Windows Phone 8, or will they go to iOS and, increasingly, Android? And will they buy Nokia devices?

It’s ironic that Windows Phone 7 was aimed at social users, meaning 20-somethings. They were supposed to be the prime target for building market share, as there are lots of 20-somethings already addicted to social technologies. But they seem happy with Androids and iPhones, which can be used for social interactions and a whole lot more.

Now, the best hope for Windows Phone adoption is converting those Windows Mobile users — mainly middle-aged government knowledge workers — to Windows Phone 8. If all Windows Mobile users switch to Windows Phone, Microsoft’s smartphone market share would triple.

That would still have Windows Phone in last place for active mobile operating systems, but at a percentage that gives hope for further growth. In such a scenario, Android accounts for 51 percent of U.S. smartphone users, iOS for 34 percent, BlackBerry for 8 percent, and Windows Phone for 5 percent. (Discontinued but still-in-use OSes account for the rest.) Windows Phone presumably could then gain some BlackBerry defectors, as it would be seen as a viable choice for the longer term.

Windows Phone has nice attributes as a mobile operating system, and its limits are artificially imposed by Microsoft, so they could be removed. But can that happen in time to matter? That’s the real question for Microsoft and Nokia. The answer means more to Nokia, of course, because Microsoft can survive if Windows Phone doesn’t become a hit. Nokia probably cannot.

This article, “As Nokia’s Windows Phone bet falters, there’s one last hope,” was originally published at InfoWorld.com. Read more of Galen Gruman’s Mobile Edge blog and follow the latest developments in mobile technology at InfoWorld.com. Follow Galen’s mobile musings on Twitter at MobileGalen. For the latest business technology news, follow InfoWorld.com on Twitter.