Microsoft’s Windows Phone Delay in China Leaves Door Wide Open for Android and iPhone

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Microsoft‘s (NASDAQ:MSFT) Windows Phone OS competes primarily with Google‘s (NASDAQ:GOOG) Android, Apple‘s (NASDAQ:AAPL) iOS, Research in Motion‘s (NASDAQ:RIMM) Blackberry OS and Nokia‘s (NYSE:NOK) Symbian in the highly competitive global smartphone market. It was launched more than a year ago, but has failed to gain any significant traction yet. Following the U.S. launch, Microsoft has launched Windows Phone in multiple countries. It was slated to launch Windows Phone in China before the end of 2011, but now, it has stated that the Chinese launch will be delayed to the first half of 2012. [1]

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Xbox, Zune, Windows Phone and other devices account for nearly 8% of Microsoft’s $32 Trefis price estimate, which stands nearly 25% above its current market price.

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Delayed launch in China could hamper Microsoft Windows Phone’s potential growth

China recently surpassed the U.S. to become the world’s largest smartphone market by shipments. Android currently dominates the Chinese smartphone market in terms of sales with 58% share, while Nokia’s Symbian comes second with 23% share of total sales. China has been Apple’s fastest growing region by sales so far – the iPhone had a 6% share of total sales in Q3 2011, despite being priced very high.

China represents a huge growth opportunity for Microsoft. Microsoft’s Windows Phone partner, Nokia, has the best retail distribution network in the country, as well as the biggest user base with Symbian. With Nokia now focusing on Windows Phone, Microsoft has a chance to gain a significant amount of market share rapidly, and attract Symbian’s rapidly declining user base before they defect to competing platforms like Android or iOS. Microsoft stated that it is working to “ensure local citizens have a great experience with Windows Phones, and is working closely with its partners in China to determine through what channels and when Windows Phones will be available regionally.”

Microsoft is already late to the smartphone party, and this delay will extend the significant headstart that Android and iOS have already had, to capture an even greater share of the total market.

We don’t expect the Windows Phone business to impact Microsoft’s stock in any significant manner, as it accounts for only a fraction of its value.

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Notes:
  1. Microsoft Delays Windows Phone 7 in China to First Half 2012, PC World []