symbolset's Journal: IDC thinks Microsoft can sell 30M phones in 2011

IDC, the same company that predicted an overwhelming start for Windows Vista [pdf], is predicting that Microsoft will Sell 30 million units of their phone OS next year. Originally taken to mean Windows Phone 7, Microsoft later issued a correction to state that the number reflected all of Windows Mobile OS including version 6.5 which is currently in the market. Actually, being laughed out of the market would be a better description.

Microsoft Windows mobile operating systems for smartphones market share is in free-fall having dropped from nearly 20% in the quarter ending October 2009 to 6.9% for the quarter ending March 2010. It's losing 50% of its share every six months and the rate is accelerating. At a flat rate that's 1.5% share in 1Q2011. Including the accelerating rate of decline gives somewhere south of 0.7%. Negligible. Fringe. 0.7% is in a projected 500M unit market is 3.5 million units which at $15 a pop doesn't even start to pay for the cost of development, let alone any marketing money. And that's if they launch an awesome product in 1Q2011, which seems unlikely. 3Q brings 1/3 of that and past then it's zeros all the way down.

Microsoft is having IDC float these ridiculous numbers so it can push phone vendors and carriers into line - into giving up control of their user experience, into giving Windows Phone 7 preference over competing solutions, into giving up margin to get share. The message is simple: "You dare not ignore the overwhelming market power of Microsoft. You dare not argue. It is useless to resist us." The truth could not be more clear, nor more different. Microsoft is not in charge here - they're not even relevant with a <7% share. By giving up control of the user experience the phone vendors give up the differentiation that is the value they can add - their work that makes their platforms special to them is the thing that turns their product from a generic commodity to an object of desire. By giving up their margins they gain nothing but the opportunity to lose even more money - which is not their goal. By playing along with this the network providers likewise give up everything that makes them special. The smart executive will tell his Microsoft weasel: "You told me that story a year ago. Come back when you have product." The dumb executive will swallow this hook, line and sinker and fire up the co-marketing scheme without proof of product so keep an eye out for stocks to short because dumb executives run their companies into the ground.

Meanwhile, as you're all well aware Microsoft Friday reorganized its entertainment division. It's not an accident this happened on the Friday leading into a US holiday weekend any more than the announcement that the BP "Top Kill" failure was. What you may not know is that this is part of an escalating sequence of reorganizations that started in Windows Mobile nearly two years ago - and it's the third or fourth of such. Each time the reorganization goes higher up the tree and now this iteration has CEO Steve Ballmer directly in charge. Obviously there would be no need for a top-level reorganization if the product were on track, so expect the schedule to slip past Christmas and into next year or alternatively for the product to suck so hard that the level of vacuum is scientifically interesting.

Next year is too late. Nothing less than a perfect product will do, and even that is probably not enough. Nobody's going to believe a Microsoft funded IDC report in the face of actual shipping products with huge margins - not anybody who wants to survive anyway. Mobile is different. Two years is forever in mobile. A year from now to start to try to gain traction on a new OS and find developers willing to take a risk on the the continuous delays is just impossible.

In short it's game over for Windows Mobile and not too long thereafter for Windows as well. You see, there are these tablets...