Is Microsoft considering buying a handset manufacturer?

Microsoft refused to rule out the possibility that it would buy a mobile phone manufacturer, but just how likely is it that the company would make an acquisition in this area?

Rumours have been flying high and low since Microsoft’s CEO, Steve Ballmer, made some interesting comments in an interview with CNBC

When asked if Microsoft would consider buying a major handset manufacturer he gave a cryptic answer, stating that there is a difference between “bold technology bets” and acquisitions, and that it had done the former, but he would not comment on the latter in the interview.

He said that acquisitions are “a complicated subject” and asked “when does an acquisition make sense?” He had no answer for that question, but that’s likely because Windows Phone 7 is still in its early days.

Windows Phone 7 launched very late in the game, with three rival companies already dominant in the market: RIM, Apple, and Google. This late entry led to many predications that WP7 simply wouldn’t catch on.

And this may in fact be true, as Microsoft refuses to reveal its recent sales figures, which it never does for its successful products. What we do know is that it only sold 40,000 devices on launch day, a paltry figure for a launch day, which usually sees better-than-average sales. While this number may be better than sales of the Microsoft Kin, when we compare this to sales of between 200,000 and 300,000 per day for Android and Apple it paints a very grim picture.

An analyst for NPD Group, Ross Rubin, suggested that things were not going well for Microsoft and that it had failed to build the early momentum that Android did. Of course, Android took some time to really take off, but it filled a gap in the market that isn’t there any more.

Would an acquisition help with sales then? That’s a very big question, as it depends entirely on what exactly the problem is and which handset manufacturer might be bought. 

The problem with Windows Phone 7 is that, while it’s technically not bad, it doesn’t offer anything really new to the world. Apple gained popularity for its user-friendly consumer-orientated experience, while Android won the hearts of open source fanatics and people looking for a cheap alternative to iOS. Windows Phone 7 simply doesn’t have that “something” needed to steal significant market share from either of these big players.

And buying a handset company won’t help, unless it’s a major company like Nokia or HTC. If it were to automatically take the place of Symbian it has a fighting chance, but this is unlikely, as Windows Phone 7 tends to cater for the higher end of the market. While Symbian appears doomed to many, it’s much more likely that Nokia will embrace Android than WP7.

Buying out HTC or Motorola could help eliminate some of the competition, since both of these are big allies to Google, pumping out dozens of Android devices. That may lead to an antitrust probe, however, and will simply mean others will fill the void with many more Android models. There’s certainly no shortage of them.

It will also do little to affect Apple’s figures, since it does much of its manufacturing with Foxconn. Apple’s iPhone growth has been slowing in the face of the swift rise of Android, but it still has a healthy market share and a loyal fanbase. 

Android is also likely to continue its strong growth for some time, which makes it appear that a   Microsoft acquisition might simply be a waste of money.