1. navierstokez's Avatar
    I got asked an interesting question today:

    What is Microsoft's WP business model?

    The best I can think of is selling licenses to use WP OS.
    However, they paid Nokia (the biggest WP manufacturer) a lot of money to make phones. So effectively they are giving the licenses away for free to Nokia.

    Marketplace and Ads, which are shared with the developers, so I dont see a lot of income from that.

    At the rumoured $25 per license, you have to sell a lot of phones to make it profitable.

    Do you think MS has other strategies for income on WP?
    Excluding Android OEM tax, which if you want a platform to succeed, Android numbers must go down, so that's not a stable income in the long run.

    Apple makes more than $300 per phone and tablet.
    Google makes money on Ads.
    04-05-2012 01:20 AM
  2. txaggies07's Avatar
    I think it has more to do with the future ecosystems. Is an iPhone user going to buy an iPad or a Windows 8 tablet? Is an Android user going to buy a Galaxy Tab or Windows 8 tablet? Once someone has an iPhone and iPad, are they going to buy a Mac or PC? I think this is where it all eventually heads as things get more integrated. I want my phone to be an extension of my computer. As that capability evolves, picking my cell phone leads to me picking my tablet and computer.
    04-05-2012 07:41 AM
  3. bear_lx's Avatar
    I got asked an interesting question today:

    What is Microsoft's WP business model?

    The best I can think of is selling licenses to use WP OS.
    However, they paid Nokia (the biggest WP manufacturer) a lot of money to make phones. So effectively they are giving the licenses away for free to Nokia.

    Marketplace and Ads, which are shared with the developers, so I dont see a lot of income from that.

    At the rumoured $25 per license, you have to sell a lot of phones to make it profitable.

    Do you think MS has other strategies for income on WP?
    Excluding Android OEM tax, which if you want a platform to succeed, Android numbers must go down, so that's not a stable income in the long run.

    Apple makes more than $300 per phone and tablet.
    Google makes money on Ads.
    i would challenge the fact that apple makes more than 300 dollars per phone/tablet. recently read that apple struggled to keep ipad 3 at same price due to money it costs to build with the high end hardwre and that screen. apple makes their money in shear sales numbers, and stocks
    04-05-2012 07:58 AM
  4. eastbayrae's Avatar
    The license fee is mostly profit once the R&D money has been recouped. MS won't release those figures.
    04-05-2012 08:12 AM
  5. navierstokez's Avatar
    Trying to build the windows ecosystem seems more plausible. It seems like MS is only interested in pushing people towards Windows, Office and Xbox.
    It just seems like trying to make money on the low licensing fee is a very tough sell when WP is just not as desirable as android, which means that OEMs have less incentive to make WP devices. so far there are very little WP devices compared to android coming to market.

    As of right now, the only thing tying my phone to the windows ecosystem is zune for syncing and xbox live, but I dont use that much. Im not seeing how getting a WP keeps you on the windows ecosystem.
    What I would be interested to see is if apps on W8 arm and games from XBL and WP8 will be mutually compatible. If so, that would be pretty freaking awesome way to tie the ecosystems together.

    @Dizzymaker I just pulled that number out of my ***, it was just to illustrate a point that apple makes a lot of money on hardware and doesnt have to rely on their meek os to make a profit.

    @eastbayrae Do we know if R&D is recouped? They are still working on WP, so they are still bleeding money. I hope WP8 will be epic!

    I guess my point is, when you enter a "new" business, you enter to make money. Its not smart to enter the business to make money for your old enterprises. When you expand into a new segment, you want to be making money off that segment.

    Otherwise you end up like Kodak, unable to transition to the digital age.
    HP, which im pretty sure they are do or die with W8 now in the consumer market.
    RIM, lol they are screwed, no strategy, no plan, no clue. MS and Nokia should just buy up the patents.
    04-05-2012 11:59 AM
  6. KingCrimson's Avatar
    I can imagine Microsoft waiving the license fee with Nokia to help get them off the ground.
    04-05-2012 12:59 PM
  7. eastbayrae's Avatar
    I doubt MS will reveal if they recouped the R&D money.
    04-05-2012 01:15 PM
  8. KingCrimson's Avatar
    Microsoft will never recover the R&D money unless the Lumia line becomes a truly massive hit and sells 10s of millions.
    04-05-2012 02:00 PM
  9. Welve's Avatar
    i would challenge the fact that apple makes more than 300 dollars per phone/tablet. recently read that apple struggled to keep ipad 3 at same price due to money it costs to build with the high end hardwre and that screen. apple makes their money in shear sales numbers, and stocks
    well...I would say "struggled" is a bit of stretch considering the company has a 33.87% operating margin and a 25.8% profit margin. Maybe struggled to maintain these high margins...

    so at 600 dollars, they probably make about 150 dollars profit per device

    AAPL Key Statistics | Apple Inc. Stock - Yahoo! Finance

    They have very high margins for a hardware maker, but average for software and actually lower than MSFT.
    04-05-2012 02:12 PM
  10. Big Supes's Avatar
    In terms of hardware, I hear there will be a front facing keyboard on future Windows 8 business phones - much like BB has.
    04-05-2012 03:01 PM
  11. alpinestars1z's Avatar
    As of right now, the only thing tying my phone to the windows ecosystem is zune for syncing and xbox live, but I dont use that much. Im not seeing how getting a WP keeps you on the windows ecosystem.
    What I would be interested to see is if apps on W8 arm and games from XBL and WP8 will be mutually compatible. If so, that would be pretty freaking awesome way to tie the ecosystems together.
    It'll probably make more sense in the future, when Windows 8 comes out. Basically your computer, tablet, and phone will all look, feel, and operate the same. So if you know how to operate your phone, you'll know how to operate a Windows tablet and a Windows computer. It's all (or nearly) the same, there's nothing new to learn, and consumers won't be all confused.


    And as an additional source of revenue, doesn't Microsoft make some money from some of the manufacturers who make Android phones? Didn't they sue them for patents or something?
    04-05-2012 03:37 PM
  12. Siah1214's Avatar
    It'll probably make more sense in the future, when Windows 8 comes out. Basically your computer, tablet, and phone will all look, feel, and operate the same. So if you know how to operate your phone, you'll know how to operate a Windows tablet and a Windows computer. It's all (or nearly) the same, there's nothing new to learn, and consumers won't be all confused.


    And as an additional source of revenue, doesn't Microsoft make some money from some of the manufacturers who make Android phones? Didn't they sue them for patents or something?
    Microsoft probably makes more money off of android oems than google does on patents alone.
    04-05-2012 04:43 PM
  13. scottcraft's Avatar
    i would challenge the fact that apple makes more than 300 dollars per phone/tablet. recently read that apple struggled to keep ipad 3 at same price due to money it costs to build with the high end hardwre and that screen. apple makes their money in shear sales numbers, and stocks
    I don't know what Apple charges carriers for the iPhone, but I've read (can't remember where) that the high price Apple charges for the iPhone has cut into Verizon and Sprint's profit margin pretty good.
    04-05-2012 05:09 PM
  14. canesfan625's Avatar
    i would challenge the fact that apple makes more than 300 dollars per phone/tablet. recently read that apple struggled to keep ipad 3 at same price due to money it costs to build with the high end hardwre and that screen. apple makes their money in shear sales numbers, and stocks
    Yeah I'm sure that 51% profit margin on the higher end models is a real struggle. 27 on the base model
    04-05-2012 07:31 PM
  15. navierstokez's Avatar
    regardless of how the competition makes their money.

    In order for WP to be interesting at all, it needs to be generating money for Microsoft. Otherwise why keep going with it?

    Looking at MS's current cash cow. Windows. Office. XBL.
    XBL will make money as long as your console is relevant. MS is a great position to make xbox very relevant to everyone. With the recent addition of HBO, and hopefully other channels, Xbox can replace that stupid verizon or time warner tv box as the go to box. Augmented with Kinect, remote control without a remote. Skype with Kinect. The possibilities are endless. If all this is more integrated with WP would be pretty epic.
    They need to seize the opportunity.

    Office, well those are going to be free with W8 Arm, so a this market opportunity is slowly shrinking.

    Windows OS, well Windows is Windows. The world is changing, more and more people are moving away from Desktop computers, so hopefully the slate transition will go very smoothly, and regain the tablet OS market with a fully function OS instead of a half baked crippled ios.

    In short, MS cant keep relying on old cows to fund pet projects. At some point it will end.
    Does anyone see WP becoming cash flow positive for MS??
    04-06-2012 12:21 AM
  16. alaskanjackson's Avatar
    The last I read MS has licensing agreements in place for 65-70% of android phones sold. Thats $10-15 a device. My estimate is $700-900 million in pure profit annually that helps to underwrite MS expansion in mobile. Google makes little or no money on mobile advertising. Some data shows WP7 has a higher click thru rate and average users spend more time on line (than android or IOS). So as MS builds share the marketing budgets will follow? I wish I had this business. Microsoft makes money if they take share from android and makes a little less if they don't! MS is focusing their mobile expansion outside the US using legacy business's revenue to expand in India/Pakistan and China. They will sell content and software and slowly change their focus. I could go on and on. Check back in two years. Long on NOK. Short on GOOG. (just opinion folks, my data is probably not spot on but close enough for this forum)
    04-06-2012 12:59 AM
  17. thed's Avatar
    Is everyone forgetting about the marketplace? MS gets a cut of all app and music sales, just like Apple and Google do with their stores.

    Sent from my HTC Trophy using Board Express
    04-06-2012 02:03 AM
  18. gregoron's Avatar
    I think it has more to do with the future ecosystems. Is an iPhone user going to buy an iPad or a Windows 8 tablet? Is an Android user going to buy a Galaxy Tab or Windows 8 tablet? Once someone has an iPhone and iPad, are they going to buy a Mac or PC? I think this is where it all eventually heads as things get more integrated. I want my phone to be an extension of my computer. As that capability evolves, picking my cell phone leads to me picking my tablet and computer.
    Echo that. Windows phone is the gateway drug to Windows 8 tablet or PC. Now if only MS can catch up with iPhone for point of sale business add ons. I saw iPhones doing inventory checking and cash transaction activities at several businesses now. MS, they're playing in your neighborhood!
    04-07-2012 06:18 AM
  19. palandri's Avatar
    ...Does anyone see WP becoming cash flow positive for MS??
    It will come, but it will take time.

    Microsoft has very deep pockets. They can invest millions now, to see a positive cash flow 5 years in the future, while other companies who invest millions need to see an immediate return on their investment.

    I don't know where you're from, but Microsoft was getting fined a million dollars a day by a court a few years ago. I read articles from financial people who laughed at it, and said it was pocket change for Microsoft, and it would take a million dollars a day for 20 years to make a dent in Microsoft.
    04-07-2012 06:32 AM
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