Microsoft may pay $2.6 billion to Samsung, Huawei, Sony, others to make Windows Phones (Update: MSFT response)
Update: Microsoft’s communications lead Frank X. Shaw responded to the numbers provided in this post. Scroll down to the bottom to check it out.
When Microsoft persuaded Nokia to go Windows Phone, one of key reasons for the switch was the $1 billion a year in “platform support” payments Ballmer offered to Finns.
While the partnership had a very rocky start, by the end of 2013 we could call it a moderate success. At least for Microsoft.
Even if from very low base, Windows Phone is growing nicely. Android and iOS still rule mobile, but if the viable third ecosystem ever emerges, most experts agree that it will be Microsoft who will own it. There’s only one problem. Nokia now ships 70 to 90% of all Windows Phones worldwide. And when Microsoft finally acquires Nokia’s mobile division, it will be them making 9 out of ten Windows Phones.
While Ballmer&Co may have some hardware ambitions to show off the best Windows can offer and push OEM partners to innovate more, becoming the sole maker of mobile Windows devices is not what they want. So now they are doubling down on “platform support” payments and will start offering a pile of money to smartphone OEMs to make Windows Phones.
According to Mobile Review’s Eldar Murtazin, who was the first to tell us about Microsoft’s plans to merge Windows Phone and Windows RT and a major redesign of Metro UI, Samsung is on board and will get $1.2 billion from Redmond this year. There’s also Huawei, in line for $600 million and Sony with $500 million for their WP8 handsets. Another $300 million are earmarked to others. That’s $2.6 of hard cash doled out to smartphone vendors to push WP8.
Conspicuously absent from the list of major WP8 smartphone OEMs is HTC. But with their current troubles and declining smartphone volumes, they are probably lumped among others. Panasonic’s upcoming rugged Windows Phone might be part of this program too.
Will platform support payments work? There’s no way to tell right now. It sort of worked with Nokia and helped to get Windows Phone off the ground. Windows Phone is also getting better and is gaining some consumer traction, especially in the low-end. The key question is what will smartphone vendors do with Microsoft’s money and how committed they will be to their Windows Phone success. The key reason Lumias are doing ok today, is that after it abandoned its own platforms, Nokia didn’t have anywhere else to go. It had to put it al out there to make Windows Phone work. That level of commitment is obviously not in the cards with other OEMs.
On the other hand, except for Samsung, none of smartphone OEMs are doing that well. If, with Microsoft subsidies, they start making some money with WP8, that might be all the reason they need to rethink an almost exclusive reliance on Android, and make Windows Phone a major part of their smartphone strategies in 2015 and beyond.
Update: Microsoft’s communications lead Frank X. Shaw responded to Eldar’s info with a tweet:
As you can see, Mr. Shaw vehemently disputes Murtazin’s numbers. However, he seems to confirm that at least some money will change hands between OEM partners and Microsoft to promote Windows Phone. I asked for @eldarmurtazin ‘s comment on this. Here is his take:
So what should we make of this?
For me, it is pretty clear that Microsoft will pay quite a lot of money to its OEM partners to promote Windows Phone this year. As they should. There is little else they can do to wean smartphone OEMs from their Android addiction. The money will be sent to WP vendors in the form of co-marketing funds, not as Nokia-like “platform support” payments.
But we are playing with semantics here. In the end – cash is cash, no matter what you call it for accounting or PR purposes. The only questions that remain are – “How much?“, and “Will those payments lead to WP success?“