Microsoft Corporation (MSFT) Looks Dumb In The Smartphone World

Back when desktop and laptop computers still dominated the PC space, Microsoft Corporation (NASDAQ:MSFT) was king. Its Windows operating system and Internet Explorer web browser were the undisputed leaders of their respective industries. At one time Microsoft was the biggest company in the world, and its grip on the technology industry seemed secure.

Apple Inc. (NASDAQ:AAPL) came along and changed all that. The company did it by convincing America’s consumer culture that smaller and mobile are better. The introduction of touchscreen technology in the iPhone, and later the iPad, ushered in a new era of the way people access information and conduct business.

Microsoft Corporation (MSFT)People no longer wanted to log into a big clunky machine. They wanted everything in the palm of their hands. Microsoft Corporation (NASDAQ:MSFT) was slow to acknowledge the new world order, and that has cost the company its leadership position in the technology sector.

The smartphone industry started taking off in 2007 when Apple launched its first iPhone in June of that year, using its own proprietary iOS system. Google Inc (NASDAQ:GOOG) quickly jumped into the fray by launching Android that same year, and began selling Android-powered phones just a year later.

Today, Google and Apple Inc. (NASDAQ:AAPL) own the smartphone market.  It’s been estimated that Apple sold around 48 million iPhones in the fourth quarter of 2012. Samsung, whose phones primarily use the Google Inc (NASDAQ:GOOG) Android OS, sold about 63 million phones in the same quarter.

Together, Apple and Samsung control about 90% of the smartphone market. Their early entry into the mobile device market paved the way for market-dominating positions that Microsoft may never be in a position to challenge.

Microsoft Corporation (NASDAQ:MSFT) didn’t make a meaningful entry to the market until around 2010 when it introduced the Windows Phone OS. By then, Apple Inc. (NASDAQ:AAPL) held a dominant position in the smartphone and tablet spaces with the iPhone and iOS, and Android was the OS of choice for most non-iPhone devices, like the Samsung Galaxy.

Microsoft announced a deal with Nokia Corporation (ADR) (NYSE:NOK) in 2011 to provide the Windows Phone OS on its devices, and even boldly stated that “it is now a three-horse race.”

But a look at the latest numbers shows no such three-horse race at all.

At a 2% market share for mobile operating systems shipments in the third quarter of 2012, Microsoft barely even registers. You can assume that this number will probably spike higher with the recent release of Windows 8, but even then it’s tough to see Microsoft as a significant player in this space for the foreseeable future.

You may ask why was Microsoft Corporation (NASDAQ:MSFT) so slow to respond to changes in the industry, but the more fair question at this point might be has Microsoft’s late arrival done its brand irreversible damage?

It really depends on to what degree you think tablets and smartphones will replace traditional computers. On the consumer side, it appears that the mobile device domination is here to stay. People are clearly choosing to get their information from a tablet or a phone. They want to access the Internet, do their shopping, interact with each other, take pictures and listen to music all from a handheld device.

Traditional PCs can’t offer that. If you’re just sitting at home then a laptop could conceivably work just as well as a smartphone, but since people want to access information wherever they go, they’re going to lean toward using the device that allows that.

Since Microsoft Corporation (NASDAQ:MSFT) doesn’t compete effectively in that arena, it’s a big missed opportunity. Even Research In Motion Ltd (NASDAQ:BBRY) – a company that has teetered on the brink of bankruptcy – has a bigger share of the market. With the Blackberry 10 device hitting the market earlier this year, it’s another obstacle Microsoft must clear to gain a footing in this market. Its future as a player in the mobile marketplace may be very much in doubt, but to say that the company is in trouble wouldn’t be accurate either.