Can Windows Mobile square up to smartphone rivals?

A war is being waged in the smartphone market and, unless Microsoft can create the sexy device of buyers' dreams, Windows Mobile could soon be relegated to the 'also ran' category.

In this increasingly cutthroat market, Nick Jones, vice president and analyst at Gartner, told ZDNet UK's sister site, silicon.com, that Windows Mobile is at "a crossroads" and risks being left behind by its rivals.

According to Jones, the iPhone and its ilk are delivering intuitive, user-friendly interfaces that magnify Windows Mobile's faults while Microsoft's OS licensing business model is also coming under fire as open-source platforms such as Android and Symbian give their wares away for free.

Asked whether Microsoft is considering altering its licence fee for Windows Mobile, Jason Langridge, a mobility business manager in Microsoft's Windows mobile team, said: "It's not something that we've had push back from our partners so, at the moment, they're pretty happy with the relationships that we have and the way in which we provide that."

In an interview with silicon.com, Langridge claimed the OS licensing fee is not a big issue for mobile makers.

"The cost of the licence is still only a very, very tiny percentage of the overall solution cost. So the Symbian platform — if it is given away to the Symbian Foundation, if that all goes ahead as planned — that isn't a phone, that isn't a complete solution, so there's still a lot of engineering effort that a mobile operator, a device manufacturer would have to go through to actually make that a working experience for their partner.

"And the same is true with Android: there's still a significant investment to be had in terms of building that solution… We're providing a platform that our partner can take to market — whether that be a mobile operator or a device manufacturer," he said.

However, Gartner's Jones said that as smartphone prices continue to decline, the licensing fee is likely to become more significant to manufacturers.

"If a handset is retailing at €450 (£390) then the OS licence fee is pretty insignificant. If it's retailing at €200 it becomes more of an issue. At some point not too far in the future, the lowest-cost smartphones will retail around €100 or so, and then the cost of a software licence could be significant," he said.

For the analyst, the next 18 months will be crucial for Windows Mobile and will see Microsoft either throw enough money at the problems to fix them or get so far behind that the issues dogging the OS become unsolvable.

"Whether they will [fix it] I'm becoming more pessimistic than I was a year ago now… It's getting towards the last throw of the dice for Microsoft," Jones said.

"The acid test is going to be if your 16-year-old kids come up to you and say: 'Daddy! Daddy! I must have a Windows Mobile phone'. But I've got a feeling we're a long way from that at this point in time."

According to Microsoft's Langridge, the consumer space has raised questions around user interface.

"I guess it's a bit of a double-edged sword," he said. "A lot of the enterprise customers love Windows Mobile because it is Windows — it's consistent across the devices and it's a consistent experience. In the consumer space, the iPhone has caused a lot of debate about user interface."

Microsoft's strategy to date has been to allow its partners to reskin Windows Mobile with their own, hopefully more user-friendly GUIs — such as HTC's TouchFLO system...

...or Sony Ericsson's X-panel interface on the Xperia X1 device. "We're giving our partners a lot of flexibility on how they can customise that and make the experience more appropriate for the audience the device is intended for," Langridge explained.

But a more radical makeover of Windows Mobile is surely long overdue.

Microsoft announced it was acquiring mobile software and services company Danger — the outfit behind the desirable Sidekick devices — back in February 2008, but since then there have been few clues as to what's cooking in Ballmer's mobile kitchen.

According to Langridge, the Danger team has been integrated with the Windows Mobile team, but Microsoft said it is unable to provide details of what the combined team is working on.

Gartner's Jones said a "fair guess" as to what's up Microsoft's sleeve is a Zune phone — or in other words, one last attempt to win consumers' hearts and minds. But is a mobile brand based on the Zune MP3 player likely to be a hit? "It's not as if you see the 16-year-olds of the world coming up to their parents and begging for one of those either," Jones added.

Any radical Windows Mobile makeover is unlikely to arrive before Windows Mobile 7 — the next iteration of the OS, expected in 2010 — which may well be too late for Microsoft to catch up with its more nimble-footed rivals, the analyst said.

Gartner predicts the number of mobile OS platforms will shrink over the next few years as developers converge on their favourite ecosystems. According to the market watchers, the lion's share of the market will be on five platforms by 2011, and just three by 2015.

Asked which platforms will end up as the holy trinity of the smartphone world, Jones said Symbian will "certainly" be one but added various battles have yet to be played out to determine the other victors.

"Apple is continuing to grow so they're doing well," he said. "But I think the interesting battles are around people like RIM vs Android, for example, because I think RIM is doing very well today but that's more a reflection of the relatively small number of smartphones in the marketplace [today]."

"If Android works — and Google succeeds in building an ecosystem for developers and we get lots of manufactures on board — then it could well become a powerful force there."