3GSM: Microsoft and PalmSource scrap over AMPU

Microsoft has positioned devices running its smart phone operating system as the way for "operators to extract more value out of the mass market".

In a broadside against the likes of PalmSource, RIM and Symbian, a white paper released at this week's 3GSM show not only says Windows Mobile-based phones lead to higher average revenue per user (ARPU) but - critically - that they also mean higher average margin per user (AMPU).

The claim - and frequent counterclaims by the software giant's main rivals in this space - are significant because the way many organisations extend their operations away from their main place of business will rest on which way this smart phone market heads.

The white paper covers several bases. It says that the move to faster networks based on 3G and availability of subsidised-yet-sophisticated handsets will help the market take off.

IDC forecasts 130 million 'converged mobile devices' will be sold in 2008. Meanwhile, such devices, including connected laptops, will generate over $130bn in data access revenues by 2009, according to ARC Group.

However, more controversial are two claims based on primary research by Edge Strategies, included in the white paper. In direct comparison to devices based on the Palm OS, the Symbian OS and RIM's Blackberry, "the results show that Windows Mobile-based devices are likely to generate an ARPU uplift of 37 per cent - the highest of any smart device platforms".

Next best saw a 22 per cent rise.

The report goes on to say: "Users of Windows Mobile-based devices make fewer calls to their mobile operator support centre than users of competitive devices."

Edge Strategies surveyed 650 end users over the web in Europe and the US and 1,500 potential smart phone buyers.

John Starkweather, product manager at Microsoft's Mobile and Embedded Devices division, said: "Operators found that all Microsoft-based smart phones increased revenues."

Anecdotal evidence suggests smart phones in general lead to more calls for technical support, meaning that even if ARPU doubles, if costs associated with users go up greatly then each phone could make an operator less money - the AMPU can be lower than before.

Just over a year ago, rival PalmSource - whose Treo smart phones, like some based on Microsoft's OS, are carried by Orange - said the reverse is true. Namely, while both sets of device lead to great ARPU, Microsoft-based phones are harder to service.

Michael Mace, chief competitive officer at PalmSource, said: "We do a really good job on ease of use which translates to better margins for operators because [Palm OS-based phones] are easier to support."

Both Microsoft and PalmSource agree that measuring margins is tricky. Only operators have all the pertinent data and they rarely divulge it.

Both vendors also agreed that the smart phone market is segmenting.

Microsoft suggests putting an emphasis on solutions - as you might expect from a company wanting such devices to link to enterprise software such as email and desktop productivity applications - rather than products.

Meanwhile PalmSource's Mace said: "It's not about generalised ARPU or AMPU. It's about 'Is this a really good email phone?' or 'Is this a really good phone for entertainment?' It's more about the specifics."