A war is being waged in the smartphone market and, unless Microsoft can create the sexy device of buyers' dreams, Windows Mobile could soon be relegated to the 'also ran' category.
In this increasingly cutthroat market, Nick Jones, vice president and analyst at Gartner, told ZDNet UK's sister site, silicon.com, that Windows Mobile is at "a crossroads" and risks being left behind by its rivals.
According to Jones, the iPhone and its ilk are delivering intuitive, user-friendly interfaces that magnify Windows Mobile's faults while Microsoft's OS licensing business model is also coming under fire as open-source platforms such as Android and Symbian give their wares away for free.
Asked whether Microsoft is considering altering its licence fee for Windows Mobile, Jason Langridge, a mobility business manager in Microsoft's Windows mobile team, said: "It's not something that we've had push back from our partners so, at the moment, they're pretty happy with the relationships that we have and the way in which we provide that."
In an interview with silicon.com, Langridge claimed the OS licensing fee is not a big issue for mobile makers.
"The cost of the licence is still only a very, very tiny percentage of the overall solution cost. So the Symbian platform — if it is given away to the Symbian Foundation, if that all goes ahead as planned — that isn't a phone, that isn't a complete solution, so there's still a lot of engineering effort that a mobile operator, a device manufacturer would have to go through to actually make that a working experience for their partner.
"And the same is true with Android: there's still a significant investment to be had in terms of building that solution… We're providing a platform that our partner can take to market — whether that be a mobile operator or a device manufacturer," he said.
However, Gartner's Jones said that as smartphone prices continue to decline, the licensing fee is likely to become more significant to manufacturers.
"If a handset is retailing at €450 (£390) then the OS licence fee is pretty insignificant. If it's retailing at €200 it becomes more of an issue. At some point not too far in the future, the lowest-cost smartphones will retail around €100 or so, and then the cost of a software licence could be significant," he said.
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For the analyst, the next 18 months will be crucial for Windows Mobile and will see Microsoft either throw enough money at the problems to fix them or get so far behind that the issues dogging the OS become unsolvable.
"Whether they will [fix it] I'm becoming more pessimistic than I was a year ago now… It's getting towards the last throw of the dice for Microsoft," Jones said.
"The acid test is going to be if your 16-year-old kids come up to you and say: 'Daddy! Daddy! I must have a Windows Mobile phone'. But I've got a feeling we're a long way from that at this point in time."
According to Microsoft's Langridge, the consumer space has raised questions around user interface.
"I guess it's a bit of a double-edged sword," he said. "A lot of the enterprise customers love Windows Mobile because it is Windows — it's consistent across the devices and it's a consistent experience. In the consumer space, the iPhone has caused a lot of debate about user interface."
Microsoft's strategy to date has been to allow its partners to reskin Windows Mobile with their own, hopefully more user-friendly GUIs — such as HTC's TouchFLO system...
