Why the Windows Phone has a bright future

The Windows Phone is dead right? Apparently not-survey after survey indicates that Microsoft’s  (NASDAQ: MSFT)  mobile platform is gaining strength. In fact, Windows is growing faster than and other operating system and its best days might still be ahead.

Quiet success story

This conclusion is based on recent numbers from Kantar WorldPanel ComTech. It shows Windows increased its U.S. market share from 2.9% in the second quarter of 2012 to 4% in the second quarter of 2013, for a gain of 1.1 points. While iOS and Android battle for the title of the top selling mobile operating system, Windows is quietly stealing share.

Smartphone OS Sales Share (%) Q2 2013 Q2 2012 YoY % pt. Change
Android 51.5 52.6 -1.1
iOS 42.5 39.2 3.3
Windows 4.0 2.9 1.1
BlackBerry 1.1 4.0 -2.9
Other 0.9 1.4 0.5

Source: Kantar WorldPanel ComTech

And Windows success isn’t restricted to the U.S. The platform is picking up share overseas as well. In Europe, Windows took 6.9% of smartphone sales during the second quarter gaining 2.2 percentage points year over year. Windows is consolidating its position as the third operating system on the continent accounting for 9% and 8.6% of smartphone sales in France and Britain respectively.

Nokia (NYSE: NOK)  has been the biggest beneficiary of this trend. The Finnish handset manufacturer is responsible for 87% of Windows handset sales globally. Although it made up only 4% of smartphone sales worldwide during the first quarter of 2013, Nokia has seen its share of sales rise from just 1% during the same period last year. Finally, Nokia’s bet on Windows appears to be paying off.

But the best day are still ahead

Fortunately for Microsoft investors, these positive results are expected to continue. According to estimates by Canalyst, Windows is expected to start closing in on the iPhone with 12.7% of smartphone sales worldwide versus the iPhone’s 14.1% by 2017. Three trends are driving this growth.

First, Windows Phones are particularly popular with first time smartphone buyers. Of those that bought a Windows handset in the past year, 52% upgraded from a feature phone. With feature phone owners still making up over half of U.S. mobile phone owners, Microsoft is well positioned to capture this market.

Second, Microsoft’s main competitor for the industry’s bronze medal is in disarray. Over the last none months BlackBerry (NASDAQ: BBRY)  has lost eight million subscribers. The company’s BB10 launch is a flop. Last quarter the struggling Waterloo company moved only 2.7 million BB10 devices falling well short of the street’s expectations.

No doubt management is watching the internal launch numbers roll in and they can’t be pretty. Earlier this month the company announced that it was exploring its ‘strategic options’-industry code for sell out. As the last viable alternative to Android and iOS, Microsoft is well positioned if BlackBerry were to disappear.

Third, expect Chinese manufactures to drive Windows adoption going forward. Microsoft already has relationships in place with Huawei and ZTE in mobile. Rumours are also circulating that Samsung might beef up its Windows offerings. These partners could give Microsoft the scale needed to challenge iOS’s and Android’s dominance.

The one risk that could sink Windows

But there is one problem which could reverse its momentum for the Windows Phone: developers just aren’t interested in it. The Windows Marketplace has about 100,000 apps and that figure hasn’t grown substantially through 2013.

In its most recent quarterly survey of its developers, Appcelerator pointed out that interest in building applications for Microsoft mobile products has declined since Windows 8 was released. Today, less than 40% of Appcelerator’s mobile developers are “very interested” in building for Windows. In comparison, 78% of developers are interested in building applications for Android and nearly 90% are eyeing the iPhone.

The Appcelerator report sums it up nicely.

“End users cite a lack of apps for Windows phones as the number one reason for non-adoption. In lockstep, many developers cite lack of engagement from Microsoft.”

It’s a bit of a Catch-22. Without widespread adoption developers aren’t interested in building applications for Windows. But without applications, Windows can’t gain market share.

Foolish bottom line

If Windows is to consolidate the bottom rung of the smartphone industry, a well-developed app ecosystem is essential. Investors will need to watch Microsoft’s efforts to build a developer community around the Windows Phone. Yet in spite of these risks, don’t count Microsoft out yet. Windows is gaining strength and its best days might be still ahead.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Robert Baillieul, originally appeared on

Top 3 ASX Blue Chips To Buy For 2019

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked…

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of The Motley Fool’s Top 3 Blue Chip Stocks for 2019.

Each one pays a fully franked dividend. The names of these Top 3 ASX Blue Chips are included in a specially prepared FREE report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

See the 3 blue chip stocks

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.