Can Microsoft's Windows Phone 7 threaten Apple and RIM?

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Microsoft ( MSFT ) is launching its new Windows Phone 7 operating system on nine mobile phones.  The company is partnering with AT&T ( T ) and T-Mobile and is banking on phones from Dell ( DELL ), HTC, LG and Samsung.  Microsoft's goal is to push back on the dominance of the smartphone market by Nokia's ( NOK ) Symbian, RIM's ( RIMM ) OS, Apple's (AAPL) iOS and Google's (GOOG) Android.

We believe that the OS's compatibility with the XBox Live, tight integration with Office 2010 and AT&T's U-verse home TV services are some of the attractive features that could threaten market share of competitors such as Apple and Research in Motion in the consumer as well as the enterprise smartphone segment.

Can Windows Phone 7 threaten Apple in the consumer segment?

According to Gartner , Microsoft's share of the smartphone operating system market has nearly halved, falling to 5% in the second quarter of 2010 from 9.3% a year ago. Microsoft failed to catch up with its peers, primarily Apple's iPhone, RIM's BlackBerry and Google's Android in terms of mobile software innovation.

In another article , we talked about how Microsoft's Windows Phone 7 won't have any major impact on Microsoft's stock as the segment contributes little to the overall value of the firm. However, Windows Phone 7 has some attractive features for consumers, which could slow down the growth of Apple iOS, BlackBerry OS and the Android OS.

Microsoft Windows Phone 7 provides integration capabilities with XBox Live that will potentially make smartphones using Windows  Phone 7 attractive to gamers. XBox Live is an online gaming service that charges users a fee to play multi-player gaming, and has nearly 10 million paying subscribers.

Another attractive feature is the integration of AT&T's U-Verse home TV service which would allow customers to sign up for an entertainment plan to access cable shows found on its TV service. The mobile service will cost $9.99 a month for non U-Verse customers, and will be free for high-end U-Verse subscribers. We estimate that there are around 3 million U-Verse TV subscribers.

We believe that the Apple iOS, used in the iPhone and iPad, will continue to gain market share. According to our estimates, the Apple iPhone will gain market share from around 2% in 2009 to about 11% in the global mobile phones market over our forecast period.

However, there could be a downside of 5% to Apple's stock if its market share increases slowly to reach 10% by 2016, instead of the 11% that we currently forecast.

Can Windows Phone 7 threaten RIM in the enterprise segment?

Microsoft already has a big presence in enterprises with its dominance in the PC OS and productivity software market. It can leverage its large enterprise customer base to grow its presence in the enterprise mobile phone market. Windows Phone 7 offers tight integration capabilities with Office 2010, including products such as SharePoint, OneNote, PowerPoint and Outlook e-mail and calendar.

RIM is the market leader in the enterprise mobile phones market with a share of around 66% as of August 2010. However, given the threat posed by Microsoft with its new operating system, Microsoft could take away some of RIM's share in the mobile phone's enterprise segment.

RIM's share of the global mobile phone market should reach 3.7% this year, up from 2.7% in 2009. We expect this growth to continue in coming years, reaching 8% by the end of Trefis forecast period.

However, there could be a downside of 10% to our price estimate for RIM if its market share only reaches 7% by 2016, instead of the 8% that we currently forecast.

You can see the complete $361 Trefis Price estimate for Apple's stock here.

You can see the complete $72 Trefis Price estimate for RIM's stock here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DELL , MSFT , NOK , RIMM , T

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