Surprise! Microsoft's Gaining Domestic Smartphone OS Market Share


After announcing what many investors and analysts considered a surprisingly positive fiscal Q3, Microsoft shareholders are finally seeing some light at the end of the tunnel. Microsoft's shift to cloud-related products and services is beginning to drive revenue growth, but questions remain about users' willingness to buy mobile devices running its much-hyped Windows 8 operating system, especially here in the States. Turns out Microsoft is making strides there, too.

The usual smartphone OS suspects
The latest data from Kantar Worldpanel detailing Q1's domestic smartphone OS market share shows the usual cast of characters sitting at the top. That's not surprising. What is eye-opening is the dent Microsoft's Windows 8 is making in the U.S., even as Google's Android OS and Apple's iOS market shares remain flat, or worse.

With 49.3% domestic smartphone OS market share in Q1, Google continues to lead the way, just as it does globally. Apple, as is par for the course, remains a close second in the U.S., running 43.7% of our smartphones. With 37.4 million smartphones sold in its recent fiscal Q2 and such a strong domestic presence, running neck-and-neck with Android in the U.S. isn't a shock. Apple's piece of the pie is impressive though, especially when you consider Android has the benefit of being the OS of choice for multiple smartphone manufacturers, while Apple's iOS is all about iPhones.

Now, the rest of the story
In spite of the huge OS lead Google and Apple enjoy, digging a bit deeper into Kantar's numbers for Q1 paints an intriguing picture, especially for Microsoft fans. Though Android's share of the smartphone OS market improved in Q1 compared to the year-ago period, it was marginal at best. And what little growth Google's operating system did garner came early in the calendar year, as evidenced by its 1.9% decline versus the three-month period ending in February.

As for Apple, its share of the U.S. smartphone OS market actually declined in the first quarter of 2013, dropping about 1%. While factors such as the timing of new smartphone rollouts and increasing competition tell part of the story of why Apple's OS share is declining, Microsoft's Windows 8 growth in Q1 also had an impact.

Windows 8 now accounts for 5.6% of all U.S. smartphone operating systems; a paltry number compared to the incumbents. But there are a few points worth noting before discounting Windows 8. First, as the relative new-comer on the block, consistent growth is what investors should concentrate on in these early stages. Overtaking Android or iOS was never going to happen overnight.

Another worthy consideration is comparing Microsoft's market share with last year's Q1. During the same period in 2012, Windows 8 owned 3.7% of the stateside OS market. Yes, Microsoft's OS share remains far behind the two leaders, but a 50% jump shouldn't be discounted. If nothing else, the significant improvement in Microsoft's piece of the OS pie demonstrates an extremely positive trend.

Finally, when feature phone users traded up to a smartphone this past quarter, turns out a lot of them chose Windows 8. According to Kantar's data, 52% of users who bought a Windows phone did so after ditching their feature phone, fueling Microsoft's year-over-year growth. By contrast, most iOS and Android buyers just swapped their smartphones. That's significant, because unlike the global mobile phone market that saw Q1 smartphone sales outpace feature phones for the first time ever, domestically, there are still more old-school units. If the trend to upgrade from feature to smartphones continues, Microsoft should benefit.

It's not difficult to find analyst and tech gurus bemoaning Windows 8. That's the nature of the IT beast. But as Kantar's data highlights, Microsoft's new OS isn't going away any time soon, and given a few more quarters like this one, will start making some real noise in the smartphone and mobile computing markets. On top of Microsoft's recently announced fiscal Q3, this latest news should have long-term investors feeling awfully good.

With the release of its own tablet, along with its Windows 8 operating system, Microsoft is looking to make a splash in the booming mobile computing market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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