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Monday, October 23, 2006

Microsoft Mobile Should Give Up The Ghost (MSFT)(SNE)

Microsoft said its goal is to double the number of mobile phones that runs Windows. At the end of 2005, that number was six million, so they may hit 12 million. Among the competitors is RIMM and its Blackberry. That company has six million users and wants to double that number each year.

In other words, everyone wants their business to double. Nice work if you can find it.

The problem with all of this is that there will be over 970 million cell phones sold this year.
That represents a growth rate of about 20% over 2005. But, that growth may slow next year.

Why Microsoft would want to be in a one billion unit business with a 12 million unit presence is somewhere beyond easy comprehension. The company’s operating system runs on 90% of PCs, so it is a market that makes tremendous sense. The company’s Xbox business has significant share and some hope of eventually passing the Playstation from Sony as that company’s fortunes flag further each day.

One of the beefs about Microsoft is that it too often violates the Jack Welsh rule of being either No.1 or No. 2 in any market. Since Microsoft has had some success following that dictate, its presence in the phone business appears to have no strategic value and the company already has enough headaches.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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