The January numbers are out from Comscore detailing smartphone market share numbers in the U.S. and they are interesting for the first time in a while. While there is no doubt that both Apple's (NASDAQ:AAPL) iPhone and Google's (NASDAQ:GOOG) Android dominate the scene here in the states, the question on many people's minds has been whether or not Microsoft's (NASDAQ:MSFT) Windows Phone OS could finally stem the bleeding and begin taking market share. The answer from this month's Comscore report is that yes, indeed, it can.
The numbers for Windows Phone have been nothing short of excellent coming out of Europe with double-digit market share numbers showing up in a handful of markets and sizable gains being made in others. The U.S. has been the laggard and if one looks at the strategy employed by Microsoft and its partners like Nokia (NOK), one would be hard-pressed to believe they weren't conceding defeat at the retail level.
So, when Comscore, whose numbers have been the most conservative of the firms tracking such things, notes a 0.2% market share gain month to month in January for the U.S. market, it has to be taken seriously. It doesn't sound like a lot but for an OS struggling for relevance and lacking product across all pricing segments, it is.
And here's why when you break the numbers down.
In January the U.S. smartphone market expanded by 3.5 million subscribers - using Comscore's numbers from December and January - from 125.9 million to 129.4 million people. The month over month increase, and Comscore reports a three month average, then means that Windows Phone's user base expanded by nearly 360,000 people to 4.0 million, a 10% increase. That is a number that moves the needle, as it were. A little more than 1 in 10 people in the U.S. chose a Windows Phone over any other OS in January. If I were a Microsoft shareholder, I would finally stop breathing fire over the company's ineptitude in this space over the past five years.
But as good as this news is for Windows Phone it is even better for iOS and Apple as the numbers there are simply stunning. With the iPhone expanding its share of the market from 34.5% to 37.8% - a gain of more than 3.2 million handsets. And yet, somehow, the hedge funds continue to pummel Apple's stock into a bloody pulp while Google's continues to soar into the wild blue.
And that's the funny part because when you look at Android's numbers, they are no better than Windows Phone in terms of increased subscriptions, which is putting paid the idea that once a non-Apple customer gets a choice for a smartphone, Android looks a lot less compelling. Android lost 1.3% of the market.
I've been critical and continue to be so of Microsoft's strategy to attack only the top end of the market in the U.S. in these initial 6 months of the lifecycle of Windows Phone 8 and I believe it has cost them significant market share because of it. Despite the obvious dysfunction that roams the halls of the Redmond campus -- *cough* Ballmer *cough* -- Microsoft has itself a good product with a main partner in Nokia that is changing how we view these slabs of connectivity goodness from a style perspective.
But, there is still a ton of work to be done to bring all the pieces of Microsoft's strategy together. It still has pricing issues with OEMs on Windows and Office licenses. The latest news that the license fee for Windows and Office for mobile devices utilizing a screen smaller than 10.8" will drop from $120 to $30 is a great start but if I'm a laptop OEM, I'm fuming. Microsoft is essentially saying make tablets that don't compete with the Surface. With the monthly subscription pricing structure for Office 365 in place - a format that makes me bullish on the stock, frankly - entry level laptops will still not come with Office pre-installed, which seems just silly.
Not that I think this situation will continue in this state, but it all seems poorly thought out and reactionary. This pricing should have been in place before Office 2013 and Office 365 was released. With OEMs bailing on Windows RT tablets, Microsoft had to do something, quick.
Regardless, of these things, there is a real opportunity for Windows Phone to begin grabbing a sizable chunk of the U.S. market now that Microsoft has loosened up its control on the cash cow that is Office - a major selling point for Windows Phone at the enterprise level - and Nokia, Huawei and Samsung (OTC:SSNLF) have entry level phones to fill in the price points. Next month's numbers from Comscore could be very interesting indeed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I have a windows phone.