MS eyes "strong growth" for Windows Mobile

Daisuke Wakabayashi

LAS VEGAS: Microsoft Corp. envisions several years of "strong growth" for its Windows Mobile business and expects license sales of its mobile phone operating system to double in the next business year, Robbie Bach, its head of entertainment and devices, said on Tuesday.

After years of struggling to gain momentum, the business is finally at a tipping point, Bach said in an interview.

"Three years ago, I could walk through Microsoft halls and see Windows Mobile phones. Now, I can walk through any airport in the world and see Windows Mobile phones," said Bach, in Las Vegas to speak at two Microsoft developers' conferences.

"Strong growth is sustainable for several years," he said.

Operators sold 5 million mobile phones running the Windows Mobile platform in the business year that ended last June.

Bach, who is one of Microsoft's three business presidents, said he expected that figure to more than double to between 10 million and 11 million this year before doubling again to around 20 million handsets in the 2008 business year.

Analysts estimate that Microsoft generates license revenue of $8 to $15 per handset, depending on the configuration.

Microsoft does not break out separate sales and profits for the Windows Mobile business, choosing to mix the division's earnings with the losses from its Xbox game console business and Zune digital media player.

But Bach said the Windows Mobile business is profitable.

Most of Microsoft's growth in Windows Mobile has come from North America and Western Europe, where users are shifting to high-end smart phones.

In the United States, the introduction of stylish new smart phones like Samsung Electronics Co. Ltd.'s BlackJack and Motorola Inc.'s "Q" phone have helped to drive consumer demand.

Bach said the next phase of growth for Windows Mobile phones would depend on Microsoft's ability to tap emerging markets, where the mobile phone -- rather than the personal computer -- is often the first computing device.

"If you go out more than two or three years, you're going to see a point where we're going to have to generate growth in India and China and other parts of the world," Bach said.

THREAT FROM APPLE

Bach played down the threat of Apple Inc.'s iPhone to sales of Windows Mobile smart phones.

Apple's iPhone, due out in late June, is one of the most anticipated new mobile phones in years.

Aside from making phone calls, the device comes with an iPod media player, a browser to surf the Internet and a touch screen.

Apple aims to sell one million units of the phone, available in $500 and $600 versions, in 2008.

"In terms of impact on our business, we think little to none," Bach said.

"That's not a knock on the iPhone, but it's a $500 device targeted at Apple enthusiasts," he said, adding that Apple would probably sell as many iPhones as it could make.

When asked if Microsoft would consider a phone around its Zune music player, Bach acknowledged that the company had discussed the possibility but said it was concentrating on promoting the Windows Mobile brand.

"You should think about Zune being focused on music and video," he said. "We want to focus on innovations in the core functionality."