Forbes put out this article yesterday, shedding some light on the subsidized cost of software licensing a Windows Phone. Keep in mind, Microsoft is charging about 20-30$ per phone so this comes in at a whopping 200$. Now this isn’t an exact science because this obviously can’t include support, marketing, or manufacturing costs of these devices but that means you’re looking at making about 200$ per handset to get into making a Windows Phone. You still have actual device cost but most manufacturers are getting that down to around 2-300$ in pure hardware. This means you’re breaking even or seeing very good profits for what phones are sold (regardless of how few), due to this cash out. Is there any way that this is a smart business model?
Microsoft has a great product. They just need to get mind and marketshare. Even our resident kool-aid drinker came away with a review that sounded like he was thinking of cheating on his second love. But a great product is never enough to make total success. Especially when your consumer image is about as clean as the stage at a Vegas strip club. So in order to overcome this Microsoft is dipping into that 50 billion dollar cash reserve fund to get this stuff to market. This will probably look like an investment blood bath, but Microsoft is facing a really different challenge than what Android had to overcome.
When Android was releasing it was the second modern smartphone (as I define them based on capacitive touch, and not a blackberry storm for obvious reasons,) operating system out there. They were in a field with themselves and Apple. Every handset maker, to compete with the new mobile world wonder that was the iPhone, only had the option to grab onto Android. Even in those days there was not much hope for Windows Mobile, regardless of its vastly superior functionality when compared to iPhones and Android handsets. This new generation proved form over function (a lesson that many current Android manufacturer’s have forgotten but that’s another article.) These handset makers poured all their own resources into this manufacturing and marketing because they had no other streams of revenue. Microsoft is not blessed with this conundrum, coming into the market after Android had already been a boon for most of their hardware partners. HTC was dropping phones on the market just as bad as Microsoft had been dropping the ball. So now, with a third way for these handset partners that Microsoft had taken for granted, they have to spend a little cash to get it out there, and that’s exactly the task for this fiscal year at Microsoft and its primary handset partner, Nokia.
Will this be enough to get Microsoft out of the hole, and back into the minds of consumers? Will it at least start to merge the successes of Windows 7/8, Xbox, and Windows Phone to change consumer’s perceptions of Microsoft as bland and boring? And does anyone else think that Ballmer should smile more, because he just looks creepy as shit when he doesn’t?