Google and Microsoft may end up engaged in a mobile turf war that will drive down prices and commoditize handsets running Android and Windows Phone 7, according to an industry analyst. In a note issued to investors, Needham & Company’s Charlie Wolf argued that although Android continues “its winning ways,” Windows Phone 7′s “successful launch” could shift some bargaining power over to manufacturers like HTC and Samsung, who may be able to pit the two platforms’ proponents against one another in order to win concessions for favoring one OS over the other. In the the long run, however, suggests Wolf, “commoditization, accompanied by deteriorating prices and gross margins, appears inevitable for licensees of the Android and Windows Phone 7 operating systems.” Only Apple’s iPhone could possibly avoid this top-down pricing pressure, says Wolf.
While Wolf paints a compelling picture of future market conditions, we’re not sure that Windows Phone 7 has the momentum nor the openness to catch Android: Microsoft lost a large chunk of its most devoted customers by locking WP7 down so tight, and it’s not clear whether or not the company will be able to cultivate a new group of die-hard fans to replace them. One thing we do know is that the availability of OS X and Linux-powered machines in the computing sector has not killed off high-end Windows machines, and we doubt that competition will be fierce enough among smartphones to create a world of ten dollar Droids and Galaxies.