Microsoft Mobile,But Will Consumers Buy? ~ " Century Fox Post "

Joe Belfiore, corporate vice president of Microsoft, introduces the Windows Phone 8 mobile operating system.

The technology industry is buzzing that Microsoft Corp. (MSFT -0.20%) could emerge a winner after Apple Inc.'s (AAPL -0.13%) big patent suit victory. But there's a catch: Consumers must be convinced they want what Microsoft is selling.

The ruling against Samsung Electronics Co.—and the blow to Google Inc.'s (GOOG +1.20%) Android software that powers its phones—has given carriers and phone manufacturers a strong incentive to pursue an alternative mobile operating system.

Yet while carriers have offered their marketing support and Microsoft has paid some developers to build apps, phones powered by the Windows Phone operating system haven't yet fully resonated with consumers.

For wireless store manager Luke Connell, the problem with Windows phones is that he can't play the popular game "Words With Friends." For Swedish designer Jacob Ravn, the issue is that the Microsoft phone interface doesn't match the iPhone's ease of use. And for Ryan Matzner, a director at the mobile software consultant Fueled, there aren't enough people using Microsoft phones for him to recommend clients build new games and services.

"I would love to develop Windows apps, but that ecosystem just isn't there," Mr. Matzner said.

Sales of Windows phones have disappointed Nokia Corp., which receives regular payments from Microsoft to develop phones using its software.

Nokia's current high-end Windows smartphone, the Lumia 900, got a big marketing push from No. 2 carrier AT&T Inc. (T -0.62%) earlier this year. Behind the scenes, AT&T's independent wireless dealers also have a strong financial incentive to sell the device.

Profits on a sale of the Lumia are $70 higher than on the iPhone and $15 higher than on the popular Samsung Galaxy S III, which runs Android, according to an independent AT&T retailer with a network of stores. The Lumia 900 accounted for only about 2% of those stores' unit sales, this retailer said.

The results are similar at T-Mobile USA, the country's fourth-largest wireless carrier. Saber Ammori, an independent retailer who owns 155 T-Mobile stores across the country, says Windows Phone devices account for just 3% of his sales.

"It just hasn't taken off with a lot of people," Mr. Ammori said.

Worldwide, Windows accounted for just 3% of global smartphone sales in the second quarter, up one percentage point from a year earlier, according to International Data Corp.

(AAPL -0.13%) Microsoft's next attempt to win over phone buyers will come next week, when it is expected to unveil the first smartphone built on its newest Windows Phone software, in partnership with Nokia Corp. (NOK1V.HE -7.82%)

Many in the technology industry think the unique design of Windows Phone could give it an advantage in the mobile industry as Apple tries to crack down on copycats.

Rather than rely on a grid of iPhone-like square icons to represent applications, as Android's interface does, Windows Phone presents the user with interlocking tiles of different sizes.

Mr. Connell, a manager in O'Fallon, Mo., at one of Mr. Ammori's stores, said Windows phones are being considered by customers who are buying their first smartphone and aren't looking to do much with it but check e-mail and browse the Web.

"The apps aren't as rich on the Windows phones yet as you see in Google," Mr. Connell said.

Microsoft faces a classic chicken-and-egg problem. The company is having a hard time winning over app developers because it lacks a large base of phone customers.

And it is struggling to win over customers in part because it is missing popular apps like photo-sharing service Instagram and game "Angry Birds Space."

Imangi Studios, a small mobile-game studio that makes the popular "Temple Run" game available on iPhone and Android, says it has no plans to build a version for the new version of Windows phone software even though Microsoft asked them to do so.

The small software developer previously adapted its iPhone game "Harbor Master" for the current version of Windows after Microsoft paid it to do so. The version was released in March 2011 and sold for $2.99, but although it was a top seller on Windows it didn't lead to many overall sales because the audience was so limited, Imangi co-founder Keith Shepherd said.

"It did not do great for us," co-founder Natalya Luckyanova said. Imangi only has three employees, and the company would rather focus on developing and improving games than adapting games for new platforms, Mr. Shepherd said.

Microsoft said its Windows Phone Marketplace offers more than 100,000 apps and games, with hundreds more coming each day.

Nokia, which is using Windows to power all of its new smartphones, also pointed to the growing roster of apps, saying it has made progress "creating an alternative to Android and Apple."

Among the new Windows Phone apps to be unveiled in the coming months are Zynga Inc.'s (ZNGA +0.65%) "Draw Something" and "Words With Friends"—popular games on Android and the iPhone.

Some developers, however, say Windows versions of apps can be inferior to those made for Apple and Google. Radio app Spotify has a rating of 4.5 stars out of 5 on iPhone, while the Windows version gets just three stars out of 5.

"Just because the app is on a platform does not mean that it is good," said Mr. Matzner, the mobile software consultant.

Jason Goldberg, CEO of design website Fab.com, which gets about 25% of its weekly sales from mobile, says it has no plans to develop for Windows this year even though the company is prioritizing mobile development over the Web.

The reason is it's easier to make sales on the iPhone thanks in large part to the built-in iTunes billing system.

Mr. Ravn, a digital designer who lives in the southern Swedish town of Hammenhög, bought a Nokia Windows phone a few months ago after he heard rave reviews from friends. Within days, Mr. Ravn was back to using his iPhone.

"A lot of things weren't as intuitive as they are on the iPhone," Mr. Ravn said. "In order to try to somehow challenge Apple and be different, I think they just maybe went a bit too far.

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Edited By Cen Fox Post Team

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