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Windows Phone 7 presents a big gamble, for Microsoft and consumers

Rob Pegoraro
Friday, October 15, 2010; 11:33 AM

When Microsoft introduced its Windows Phone 7 operating system on Monday, it couldn't make its traditional sales pitch to consumers: We're Microsoft, this product has "Windows" in its name, get on board now!

Instead, it had to ask something different: Trust us to build this platform.

You've heard that before from other companies. Smartphones might be the most interesting product of the electronics industry, but the flip side of that excitement is uncertainty.

Buying into a new phone platform amounts to placing an expensive bet. The cost of the phone is the last of it; you also have to add in the cost of a required service plan you might not have otherwise bought, the cost of any apps you buy and - most important - the opportunity cost of not being able to switch to a better phone for another two years without paying early-termination fees.

You have to think like a venture capitalist, but without the potential payoff of riches down the road.

Sometimes the bet pays off. Apple had never built a phone before launching the iPhone in 2007, but that venture has succeeded beyond any sane expectation. Google's Android operating system didn't reach the market until after the iPhone had secured an enormous head start, but it's on its way to passing Apple.

Sometimes a new phone venture sinks almost instantly. Microsoft axed its Kin line of smartphones less than two months after they arrived in Verizon Wireless stores. They still function fine as phones, but they'll never live up to their advance billing.

In other cases, it takes time for a platform to crumble - usually, after years of success tempt companies to slack off. Palm's defunct Palm OS and Microsoft's now-abandoned Windows Mobile come to mind. (When I unloaded an old Palm Treo on eBay, I was happy to make just enough money on the sale to recover the costs of the now-useless Palm programs I'd bought years ago.)

Prior to Windows Phone 7's launch, the most uncertain smartphone contender was Palm's webOS.

This sleek, multitasking operating system looked like a breakthrough when it debuted on Palm's Pre smartphone two summers ago. But less than a year later, without any significant hardware or software advances and with flagging support from third-party software developers, Palm's project appeared to be circling the drain.

Now that HP has bought the company, its prospects look brighter, but only if HP's financial backing helps it ship a reinvigorated lineup of phones with upgraded software that sell well enough to renew the interest of programmers.

Windows Phone 7 faces the same basic obstacles, although in some aspects Microsoft seems to be off to a better start than Palm. It has lined up the likes of Dell, HTC, LG and Samsung to build devices running this software, ensuring that one its success won't rely on the virtues of a single phone design. And with both AT&T and T-Mobile selling Windows Phone 7 models, it's not requiring that customers all like one carrier - although its failure to build in support for the CDMA wireless technology of Sprint and Verizon still sets this project back.

But WP7's software selection seems even more unsettled than Palm's did when the Pre launched.

In its favor, count the programs from such name-brand sources as Twitter, eBay, Netflix, EA, Slacker and Amazon's IMDB that Microsoft showed off Monday at its launch event in New York. Others are on the way, such as Foursquare's upcoming app. And one of the most important mobile applications, Facebook, comes built into Windows Phone 7.

(Note that companies that rush to ship software for new phones face risks of their own: Yelp quickly shipped an app for webOS but now seems to suffer from developer's remorse.)

But then consider all the names we haven't heard from yet: Evernote, Dropbox, Kindle, Yelp and Pandora, to name a few popular on the iPhone and Android that have yet to announce WP7 plans. Quantity counts as well as quality, and here Microsoft will inevitably start out light-years behind the iPhone and Android. Microsoft might brag about "thousands" of apps in the works, but I would be surprised if a four-digit number of apps were available when the first WP7 phone, AT&T's $199.99 Samsung Focus, ships Nov. 8.

For Windows Phone 7 to secure a viable share of the market, that will have to change. Microsoft will have to work with the tenacity of a Chilean miner at getting developers to write apps for these phones - presumably, after they've already put in time on separate iPhone and Android programs.

Windows Phone 7 buyers also have to trust that the company will keep plugging away at its own software, adding such missing features as copy and paste (promised for early next year), visual voicemail, video conferencing and voice text input.

For all of those obstacles, however, Windows Phone 7 seems a safer bet than this season's other mobile product launch: Research In Motion's PlayBook tablet computer. That device represents RIM's first venture into a new category of hardware, and it doesn't run on the same operating system as RIM's BlackBerry phones, which itself was just updated.

Windows Phone 7 has one other thing going for it: Microsoft doesn't have any other options left. Either this platform survives, or the company gets shut out of the most exciting part of the computer industry.

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