Why Cortana Assistant Can Help Microsoft in the Smartphone Market

Chris Lau, Kapitall: Microsoft’s Cortana assistant has the potential to boost sales.

Microsoft (MSFT) is still very far behind Apple (AAPL) and Google’s (GOOG) Android in the smartphone market. Helped by good design, quality, and a cult following, Apple boosted interest in its devices through the introduction of Siri. Microsoft is finally responding to Siri’s offering with its own: Cortana. Microsoft is rapidly growing market share in smartphones, thanks mostly to strong demand for its low-end device. The Cortana assistant could be the voice-activated assistant that brings Microsoft’s Windows Phone 8.1 back into the mainstream.

Why Cortana matters

Setting up Cortana requires a Microsoft Account. This is immediately useful for Microsoft. Declining use of emails made Outlook.com (formerly Hotmail) less valuable. By getting users to create an account, Microsoft may pitch the free email service, along with Office 365.

Distinctive features in Cortana

Cortana has some features that are not found in other smartphones. This includes a do-not-disturb (Quiet hours) mode. This mode is already available on Windows 8.1. The user interface also includes Cortana animations (such as fully live tiles).

Cortana will be officially unveiled next month (April 2 – 4 2014) at Microsoft’s Build Developer conference.

Comparative valuation

Microsoft, Google, and Apple are all up 25% or more in the last year.

Click on the interactive chart to view data over time. 

Of the three, Google is valued at 28 times forward earnings, while Apple is valued at just 12.

Microsoft set to regain edge

Google’s Now and Apple’s Siri is comparably weaker than Microsoft’s Cortana offering, if early previews of Cortana are accurate. Microsoft is still far behind in terms of market share, but the smartphone market is malleable. A new market leader needs just 2 years (the length of the average phone contract) to be dominant.

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