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Windows Phone 7

by

Microsoft

An Integrated Company Analysis by Team B3 John Burton, Andrew Maxfield, Elizabeth Meyer, Nicholas Wagner, Yong Zheng

Agenda
Executive Summary
Recommendation

Windows Phone 7 (WP7)


Current WP7 positioning Repositioning WP7

Commentary on Finance & Accounting Q&A

Executive Summary
Launch has been bedeviled by poor sales. . .things arent going to get better any time soon.

Microsofts mobile future depends on WP7


Gain traction Increase market share Stock price influence

Recommendation
Reposition WP7 as the BlackBerry Killer
Target new consumer Introduce new service offering Eliminate licensing fee

Windows Phone 7
Smartphone Industry Background: Expanding market share Increased competition Segmented market
Functional Tech Savvy

Trendy

Corporate

Competitive Forces
Buyer Power (Strong) 1. Two wireless carriers make up 56% of total marketshare

2. Restrictions and loyalty related to service contracts

Barriers to Entry (Strong) 1. High R&D investment necessary to compete.

Rivalry (Strong) 1. Competition for marketshare in growing industry. 2. Competition for internal developers for apps, etc.

Supplier Power (Medium) 1. Connectivity is king--OS is key to user experience. 2. Brand loyalty plays a minor role in hardware preference.

2. Intellectual Property protection.

Threat of Substitutes (Weak) 1. Smartphones will continue to replace other devices (e.g. laptops, landlines, etc)

WP7: A Visible and Risky Launch


Biggest TV marketing campaign in the history of the mobile business Head-to-head against Apple, Google, and BlackBerry Windows Mobile is less than 2.4% of MSFT operating revenue

Current Marketing Mix


Product: Live Tiles and Hubs Price: $8 to $15 per license sold to carriers Place: AT&T and T-Mobile, Verizon (Jan 2011) Promotion: the phone to save us from our phone

Repositioning WP7: The BlackBerry Killer


Target the Corporate consumer BlackBerry is faltering WP7: the perfect BlackBerry replacement
35+ years old Educated and climbing the corporate ladder Travels for work or checks email while at home Most likely to be brand loyal Likely to choose a BlackBerry: Company recommended Security features

*Select data from Mintel Reports

Repositioning Marketing Mix


Product: Service and apps Price: Free licensing; services negotiated Place: Add direct-sales channel for B2B Promotion: Two distinct strategies
B2B: Direct sales to corporations B2C: . . . in, out, and back to workand back to life.

Sample TV Ad Script

Your boss may never understand you, but now your phone does. Introducing Windows Phone 7, the first phone to bring reliability, security, and efficiency to your work life. Thats because WP7 syncs seamlessly with Word, Excel, Powerpoint, and Outlook making it easy to open, edit, and share files securely. Youll spend less time lost in your phone and more time getting the job done. Its like a home office, but smaller, less intimidating, and with much better battery life. Windows Phone 7 gets you in, out, and back to workand back to life.

Commentary on Finance & Accounting


Stock price valuation
Sales: 11.3% growth declining to 3% growth 10.08% discount rate
Beta: 0.89 Risk free rate: 3.32% Expected market return: 10.91%

Conservative estimate: $32.41/share

Accounting
Methodology
Inventory Valuation Tax Liability

Select disclosures
Stock Repurchase & Executive Sell-off Dividends

Q&A
Mobile Industry

WP7 Repositioning
Finance & Accounting

Appendix
Company Revenue (in Millions)

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