Microsoft Doing Everything Right

When I read the first article about the Microsoft (MSFT)/Yahoo (YHOO) combo, I did not fully realize how it would change my search experience. But when I checked my Yahoo mail this morning, I was pleasantly surprised to see a Bing bar at the top. One of the things that crossed my mind was how could a regular Googler like me be enticed into using Bing?

It now appears that I have to do nothing, I just open a Yahoo finance/mail/or any other Yahoo page and there it is. But would I still continue using Google (GOOG)? I think not, especially if Google is not my home page and the content is more or less the same. This basically means that the focus has now shifted from use to content.

Microsoft has also introduced a freely downloadable version of MS Office, facilitating the use of the company’s word processing, spread sheet and PowerPoint products. Although Google already offers similar products, it was more of a defensive measure to protect the company’s market share.

The company recently signed an agreement with Nokia (NOK) to offer Word, Excel and PowerPoint features on select mobile phones from 2010. The revenue potential could be substantial, considering Nokia’s market share. While the deal should generate incremental earnings, many observers feel that it would mark the end of the Windows-based mobile operating system.

But Microsoft came up with yet another strategy to prove its adaptability to changing market dynamics. The company’s newly announced OneApp feature will use clouds to offer programs on GPRS phones in emerging markets. While smartphone penetration in these markets has been limited, feature phones have huge potential.

Microsoft has already entered into an agreement with South Africa’s Blue Label Telecoms, offering a dozen OneApp-powered applications. The initial package includes popular programs like Facebook, Twitter, Windows messenger and games. It would soon add other useful programs to enable bill payments and even health diagnosis.

The existing mobile operating systems from Research In Motion (RIMM), Apple (AAPL), Google and Nokia have made headway in the U.S. and other developed markets. Microsoft’s intention to target emerging markets makes sense to us.

As Google’s Android-based phones are just making their appearance felt, the new Microsoft solution could divert some buyers. The deal with Nokia, which is firmly entrenched in these regions, would play a key role in bringing Microsoft applications a superior foothold. We believe that offering the smartphone experience to existing cell phones is a smart strategy, as users are allowed to continue using handsets of their choice.

This is not all. Management also expects to launch a windows mobile apps store for cell phone users by the end of this year. Apple’s app store is very popular, although the most frequently downloaded applications are the ones that cost 99 cents. Microsoft’s ploy is to allow developers to fix their own prices, encouraging them to continue writing programs for Win Mo. We are encouraged by the company’s recent initiatives as we believe these are likely to improve its competitive position in both the search and mobile markets.

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