Microsoft and Nokia Are Buddies in Mediocrity

The latest smartphone figures from Gartner are in and they highlight just how much Microsoft (s msft) and Nokia (s nok) are in desperate need for each other. But with the way both are giving up large amounts of market share, it shows that the new partnership might not be enough for either.
While Android (s goog) continues to run away with the smartphone market, Windows Phone 7 mustered just 1.6 million in estimated sales to end users in the first quarter, according to research firm Gartner. Microsoft overall sold 3.6 million smartphones in the first quarter, with 2 million of them being older Windows Mobile devices. Microsoft’s share of the smartphone market has nearly been cut in half over the past year, from 6.8 percent in Q1 2010 to 3.6 percent in the first quarter of this year as it struggles with the migration to the new operating system.
With service providers still enamored more with Android sales, it’s been a tough start for Windows Phone 7. Android is seeing 400,000 device activations daily compared to about 17,800 WP7 units sold each day. But Gartner still sees a brighter future for Microsoft as it eventually enjoys the benefits of its partnership with Nokia, which is moving its smartphones to Windows Phone 7. And that’s likely why the two banded together in the first place, because they desperately needed each other to make a go of it in smartphones.
However, Nokia’s impact on the smartphone market continues to fade, with 27.4 percent of the market in the first quarter with its Symbian operating system, down from 44.2 percent a year earlier. Overall, Nokia’s share of all mobile phone sales has also slipped 5.5 percent from 30.6 percent to 25.1 percent. While most manufacturers are selling more phones, Nokia actually sold about 2.5 million fewer units from a year ago. If this keeps up, Nokia’s smartphone footprint could be pretty small by the time it starts really cranking out a wide portfolio of Windows Phone 7 devices.
Overall, the smartphone market grew by 85 percent, eclipsing the 100 million unit mark in the first quarter with 100.8 million smartphones sold. Smartphones outpaced the overall mobile phone market, which grew by 19 percent to 427.8 million units. Android continued to lead the way with 36 percent of the platform market, up from 9.6 percent a year earlier, followed by Symbian (27.4 percent), iOS (s aapl) (16.8 percent) and BlackBerry (s rimm) (12.9 percent.) Apple’s operating system doubled in sales from a year ago but grew its marketshare modestly from 15.3 percent a year ago while RIM’s share slid from 19.7 percent.
Gartner predicted last month that Window Phone 7 is headed for the No. 2 smartphone spot with a 19 percent marketshare by 2015 with the help of Nokia. That’s a sign of hope for Microsoft and Nokia, though I wouldn’t assign much weight to predictions like that four years into the future in a market that is changing so dynamically and rapidly. What we do know now is that Microsoft has a big challenge ahead of it selling its operating system and while Nokia is a great partner to have, its place in the smartphone market is slipping too. So it will take some amazing work by both to achieve success in this market. It’s not to say that it won’t happen, but 1.6 million WP7 phone units in the first quarter shows that the two have their work cut out for them.