Microsoft, Google eye mobile holiday sales

October 18, 2012

Microsoft and Google have a plan for this holiday season: To reach every gadget-happy shopper seeking a new smartphone or tablet.

The companies are on different sides of a rapid industry shift away from desktops and toward mobile devices. Their holiday plans will be clearer after the companies report third quarter earnings Thursday, but their strategy is part of a larger search for continued relevance as consumers move increasingly to hand-held devices.

Headed into the holiday season, Microsoft is trying to mount a comeback and planning to start a new era as the purveyor of mobile devices and services.

Consumers will get their first look at the new Microsoft next week, when the company launches a new operating system and its own Surface tablet — just one of several Windows tablets coming to compete with Apple’s market-leading iPad this fall. It’s also working on the launch of a new smartphone operating system, Windows Phone 8. Nokia, Samsung and HTC have already announced new smartphones for the system.

It’s not hard to guess why Microsoft is making the shift. Despite a massive marketing effort for ultrabook laptops earlier this year, the personal computer market is expected to shrink this year for the first time in over a decade, according to a recent study from the market research firm IHS iSuppli.

Sales of smartphones, meanwhile, are going through the roof. There are now more than 1 billion smartphones in the world, according to a study from Strategy Analytics, and the sector’s growth means that there are still plenty of customers for the taking.

“The next billion smartphones will be sold and used in just a few short years, not the decade plus that it took to reach the first billion,” said Alex Spektor, an analyst who worked on the report. “All companies involved in the mobile space will be very actively competing.”

The forecast is also bright for the tablet market, with International Data Corporation estimating 117.1 million units will ship by the end of the year.

Google seems well-positioned to ride out the shift. It even briefly passed Microsoft as the second-most valuable technology company last month. The company’s stock has grown around 30 percent since July, while Microsoft’s has remained almost the same.

While it has seen how much it can charge advertisers for every click made by a user decline, the volume of advertising has grown. With its Android operating system activating 1.3 million units a day, according to the company, Google powers most of smartphones and tablets and boosts the company’s profit stream through its mobile application store.

The firm is also now producing its own hardware, a small tablet called the Nexus 7. Headed into the holiday season, Google is expected to release another phone and tablet under its Nexus brand name.

If it does, it will come into a holiday market crowded with consumer options. The new tablets are not only competing against Apple’s iPad and Amazon’s Kindle Fire line, but also retailers launching their own devices in the hopes of catching the trend. Barnes & Noble has seen modest success with its Nook tablet, and has launched a larger version that takes advantage of the company’s new partnerships. Best Buy announced last week that it’s also jumping into the mix with a basic tablet, which is expected to cost around $250.

All are chasing Apple, which commands 60 percent of the tablet market with its iPad and is expected to launch a smaller version of the tablet next week.

The ultimate arbiters will be gadget hungry holiday shoppers.

Hayley Tsukayama covers consumer technology for The Washington Post.
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