Are We Watching the Rebirth or Slow Death of Microsoft's Mobile Franchise?

Frankly the "Mango" software update to Windows Phones yesterday was a bit overwhelming, with over 500 tweaks, changes and improvements. Some of them seem useful and "cool" others not as much. In particular I like "Local Scout," which displays a wide range of nearby and other LBS information automatically with the single touch of a button. I also like Bing Vision (like Google Goggles), although that's not truly new.

Otherwise, the launch was a dish with a few too many ingredients. Windows Phone is visually very different from the iPhone and Android, to its credit. But to many it still feels or seems derivative. The following, for example, was from the LA Times' dismissive piece yesterday on Mango: 

Phones running the new system, called Mango, will let users search for restaurants and businesses in their immediate area, perform voice-based Web searches, identify music playing in their surroundings, and switch back and forth between applications.

Those features are, by and large, innovations that well-known companies developed months or years ago.  The Yelp app -- on Apple's iPhone, Google's Android and RIM's BlackBerry operating systems -- has led the way in helping users find nearby businesses. Android phones have had voice search for close to a year.  The Shazam app has been the go-to service for song identification.  And most smartphones already allow users to run multiple apps simultaneously.

Speaking of apps Microsoft said that Windows Phone now has 18,000 apps, which appears to be more than RIM has. However that figure trivial by comparison to Android and the iPhone and so can't really be marketed. All Microsoft can say is "we have apps too." What the company said yesterday is "our apps are smarter." 

The Windows Phone OS has received generally positive reviews, yet consumers don't appear to care (at least so far). According to Gartner Windows Phone sold only about 1.6 million units globally in Q1. Developers also don't seem to be particularly interested in the platform. It's a chicken and egg problem: without success or momentum in the market no one seems to be paying attention. But with general indifference how do you generate sales and momentum? 

Screen shot 2011-04-26 at 7.29.35 AM

Source: Appcelerator developer survey Q1

Yet IDC and Pyramid Research have both projected that within a few years that Windows Phones would overtake the iPhone and even Android (in the case of Pyramid). This is all based on the Nokia relationship. Here's what IDC said

Nokia's recent announcement to shift from Symbian to Windows Phone will have significant implications for the smartphone market going forward. "Up until the launch of Windows Phone 7 last year, Microsoft has steadily lost market share while other operating systems have brought forth new and appealing experiences," added Llamas. "The new alliance brings together Nokia's hardware capabilities and Windows Phone's differentiated platform. We expect the first devices to launch in 2012. By 2015, IDC expects Windows Phone to be number 2 operating system worldwide behind Android." 

In other words, IDC believes that Windows software will boost both Nokia's fortunes and Microsoft's. The first Nokisoft phones will reportedly be out later this year. They will need to be pretty spectacular to offset the declines of both companies in mobile. Nokia, for example, saw a nearly 15 point drop in share in Q1 smartphone sales. 

Undoubtedly Windows will gain share (at least in Europe) after the first Nokia-Windows handsets come out. But it's really a leap to assume that the associated momentum will be as great as IDC and Pyramid suggest. So far Windows Phones have failed to capture the consumer's imagination -- in the US at least. My intuition is that the "hubs" and tiles concept that is at the core of Windows Phone differentiation is part of the problem.

I'm eager to see what happens when the first Nokia-Microsoft devices come out in Q3 or Q4. Then we'll know what the real outlook is.