Microsoft might benefit from Apple’s victory

Apple Inc’s decisive triumph over Samsung Electronics in the most closely watched patent trial in years could open the door for Microsoft Corp to finally hop on board the mobile boom as manufacturers of Android-based smartphones and tablets weigh their legal risks.

Microsoft sounded a challenge to Apple and Samsung in July when it took the wraps off its Surface tablet, a showcase for the revamped Windows software that it hopes will pave the way for its entry into the mobile space.

It remains to be seen if the new touchscreen-friendly and cloud computing-ready Windows 8 can prove a serious rival to Android, the world’s most-used mobile software, or Apple’s iOS. But mobile industry executives who had been cautiously considering Windows as an alternative to Google’s Android say Friday’s ruling that Samsung had copied Apple’s designs and software features had intensified their interest in a Microsoft alternative.

The key reason: fear of patent lawsuits from Apple.

The California company’s battle with Samsung was in large measure a proxy war against Google Inc’s Android software, which is used by many manufacturers to run its mobile devices. The verdict could empower Apple to file more such lawsuits.

“Some of the other manufacturers of Android products like ourselves are prepared to face similar lawsuits from Apple,” a senior executive with a major Chinese mobile maker told Reuters on condition of anonymity as he is not authorized to talk to the media.

“The Apple-Samsung lawsuit has given us some reference point on our future innovation. We’ll focus on developing our own unique user interface based on the Android platform.

“Even though the bulk of our shipments run on Android, the trend is to diversify into other products running on Windows,” the executive added, predicting that the percentage of Windows-based smartphone shipments would increase significantly, from less than 10 percent now to around a third over the next few years.

Consumer appeal

Windows 8 and Windows RT – a version of the software made for the ARM Holdings chip designs that are employed in the vast majority of phones and tablets – ship in October.

Some analysts are skeptical that Microsoft can produce a device that the mobile consumer will love.

“Microsoft has been the beneficiary of this whole fight as the other non-Android option,” said Ron Laurie, a Silicon Valley-based specialist in IP and investment banking and co-founder of Inflexion Point Strategy. “But safety (from lawsuits) by itself is not enough. You have to appeal to consumers.”

And so far the market has seen that consumers want phones and tablets that look like Apple’s devices, he added.

Hardware manufacturers, mostly based in East Asia and known in tech industry jargon as original equipment manufacturers or OEMs, are weighing their options.

“From an OEM perspective, the verdict alone, and certainly an injunction on sales of any kind, levels the playing field between Android and Windows Phone,” said IDC analyst Al Hilwa. “At this point, the two platforms would have to fight on features and developer ecosystems to win.”

Wall Street thinks Microsoft still stands a chance of reclaiming its former glory, with investors citing a promising pipeline for 2013. But they will want hard reasons to pay more than $30 for a stock that hasn’t traded above that for any extended period of time since 2000.

The verdict in Apple-Samsung was closely watched at Microsoft’s headquarters in Redmond, Washington.

“Windows Phone is looking gooooood right now,” tweeted a clearly enthusiastic Bill Cox, senior marketing communications director for the firm’s phone division, soon after Friday’s verdict.

Homegrown operating system

Asian manufacturers now need to invest in further customization of the Android platform, much as Inc has done with its Kindle Fire device, industry officials say.

ZTE and Huawei, China’s two largest handset makers, declined comment. Both have announced plans to launch Windows-based phones to supplement their Android products.

“Smaller Android phone makers like (Taiwan’s) HTC, (Google’s) Motorola and Sony will have challenging times ahead,” said Seo Won-Seok,” a Seoul-based analyst at Korea Investment & Securities. “They’ll face increasing production costs and rising entry barrier to the Android ecosystem. They now face a great risk of similar litigation from Apple.”

Manufacturers may also look at other mobile operating systems beyond Windows, analysts said. Samsung, for example, also has phones that use proprietary software called Bada.

Chinese manufacturers also have the option of homegrown operating systems such as those developed by Baidu and Alibaba, but Jane Wang, a Beijing-based analyst from Ovum, doubted they would be adopted in a big way because the ecosystem of applications and services around them remains limited.

“Chinese handset makers are a practical bunch in that they will weigh the costs and benefits when coming up with products running on a different operating system,” said Wang, “It may not be worth their while.”

Some manufacturers are particularly exposed. The smartphone portfolio of Korea’s LG Electronics Inc, for example, is entirely composed of Android devices, leaving it vulnerable should Apple take legal action against it.

And HTC, once the Android market leader, has also struggled in lawsuits with Apple and lacks its own strong patent portfolio, making it vulnerable to further legal challenges. It has tried to rebuild market share with new models, the One series, that incorporate high-level photography functions and audio technology from U.S. firm Beats, in which it bought a stake.

“For all these manufacturers it’s a risk management game,” said Andrew Milroy, Singapore-based vice president of Frost and Sullivan, a consulting company. “They don’t want to put all their eggs in one basket.”

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Microsoft might benefit from Apple’s victory