Digital Trends

Microsoft’s acquisition of Danger could be a game changer. Danger, before the iPhone, was arguably the hottest Smartphone for the young celebrity and under-20 set of teen phone users. This is the company that created the extremely popular SideKick series of phones for T-Mobile (and often used by stars like Paris Hilton, Lindsey Lohan etc). Vastly easier to use than any other previous Smartphone, and actually still better than the iPhone for anything that is text related, the Danger phone only lacked two things: The elegance of the iPhone’s hardware, and Steve Jobs to make it as big as the iPhone.

The Speed of Cell Phone Changes 

Were this a technology acquisition in almost any other segment other than cell phones, you’d likely not see much impact from it for several years in terms of either firm’s product lines. Design and cycle times, let alone the time it takes to merge code on complex products, generally has us thinking in terms of years rather than months for the benefits of a merger to emerge. 

But this is the cell phone market and recall that the cradle-to-release time for the iPhone was measured in months and you get an idea just how fast this merger could result in new products. We also don’t know how closely the companies had been working before the acquisition and there is at least a possibility that much of the work could already be well along the path to completion.

This means we could actually see a major new offering from Microsoft/Danger by the end of the year and the question is (because Apple is clearly the target ) will it kick the iPhone’s butt?

Zune Lessons 

If it wasn’t for the Zune I think we could categorically say there isn’t a chance in hell that Microsoft would step up to this challenge by the end of the year. While Microsoft has remained dominant on the desktop, Apple’s growth and continued success with the iPod and initial success of the iPhone support the argument that Apple is currently, and would likely continue, to out execute Microsoft. 

But, if you look at how much the Zune improved from version one to version two, you saw Microsoft close the gap with Apple at an unprecedented rate. In many ways the 80 GB Zune is competitive with the iPod Touch and iPod Classic, and for those that bought it last year in what seemed to be impressive volumes, it was the better choice.

This suggests that Microsoft may have figured out, for once, what they need to do to beat Apple and while the second generation Zune didn’t quite catch Apple, if the rate Microsoft is closing the gap with Apple continues, the third generation Zune should pass Apple unless they too step up their game (which Apple probably will).

The next generation Danger, based on Microsoft technology, will benefit from these same lessons and will likely fall closer to the third generation Zune, which we haven’t yet seen, when it enters the market.

What the Future Microsoft Danger Phone Won’t Have 

Steve Jobs and his marketing team remain a formidable and, as yet, unmatched resource for Apple and Apple’s products. This is not trivial because it goes directly to product design. Microsoft’s products tend to be more feature rich while Apple’s are sexier and the market is buying sex, and ease of use, over features. In short, Apple’s products are designed from day one to be easily marketed while Microsoft has instead let engineers traditionally drive development which has traditionally favored Apple. While the design part of this, as mentioned above, is likely much more competitive this marketing driven approach still largely is unique in the segment to Apple and remains a sustaining advantage. 

The other part is iTunes which is now effectively the standard with regard to digital media and remains a sustaining advantage that subscription based programs should have. As a consumer based product, this connection will remain an important advantage though if subscription (or flat rate) ever does take off this clearly would be mitigated.

The final advantage, and this one probably isn’t sustaining but the fact that it exists at all is surprising, is Apple has the better cell phone browser. This has resulted in a number of advantages with regard to how the iPhone is used including navigation. Given Microsoft sells the most common PC browser and has one of the most powerful GPS offerings the reality of this is hard to understand but it is real and I would have expected Microsoft to do better by now.

Microsoft/Danger Advantages 

Email, texting, and subscription based services are the advantages Microsoft and Danger will bring to this battle. The Danger’s major strength is in text related activities and Microsoft phones in general have stood out in this regard as better than Apple’s iPhone. Subscription based services should be a better value particularly when they can, and they don’t yet, embrace video content and this appears to be core to the future of this segment. 

In short, while Apple excels at the client, Microsoft has been working on the back end and if they can, with Danger, match on the client side, the end result should be more compelling. Once done they should be able to retain customers better because the Microsoft platform cuts across phone vendors potentially giving choices outside of just Danger that Apple can’t, without licensing, match.

Finally, price comes into play here. The Microsoft based products have hit more aggressive price points and the Danger product has much more attractively priced data services. The combination of which should result in a savings of hundreds of dollars a year and to someone in their teens in particular money comes very dearly.

This Will Be a Fight 

This is going to remind a lot of us of the initial fight between Apple and Microsoft in the late 80s where Microsoft was substantially helped by Apple’s firing of Steve Jobs. While Steve has matured a lot and is actually more capable than he was then, Microsoft’s team is more capable as well and the cell phone market is more mature than the PC market was back then which likely balances that out. 

Apple will clearly have a line of phones coming out which will address at least some of their shortcomings and Microsoft will still have to pull off the merger and come out with a compelling new product. Both have been successful in this segment but I’d argue that right now, Apple is in the better starting position. 

In the end, this fight will probably result in better more attractively priced phones and services by the end of the year and, regardless of which you choose, you’ll be happy for that. In the end, that is the only thing that is certain. If I were betting, which I’m not, I’d probably favor Apple this year because mergers are difficult to do fast well and Apple is executing extremely well. But the outcome; historically favoring Microsoft with PCs but recently favoring Apple with devices, this time, is far from certain. As the Super bowl taught us this year, sometimes the underdog does the butt kicking.