“The question investors, technologists and strategists have long been asking is, ‘What is Steve Ballmer willing to pay to beat Apple and Google?’ Now we have a small part of the answer, $230 per cell phone,” Nigam Arora writes for Forbes. “Microsoft is in a venture with Nokia to gain market share for Windows phones in its battle with Google Android. In the last quarter, Microsoft paid $250 million to Nokia.”
Arora writes, “The $230 number shows desperation, and there is no doubt that the Windows phone will live or die based on how well Nokia does. How does Microsoft justify taking such a loss? With about $50 billion in cash, $250 million is peanuts for Microsoft. Microsoft simply fell behind Apple and Google, and Ballmer recognizes that a big price has to be paid to catch up. The shocker is that AT&T may price the phone at $99 with a two-year contract. The low price is a game changer. At present, comparable phones from Apple and Samsung are priced at $199 with a two year contract… One thing is for certain, introducing Lumia 900 at such a low price is like stomping on the downtrodden RIM.”
Read more in the full article here.
MacDailyNews Take: AT&T offers the 8GB iPhone 4 for $99 with contract. No Windows Phone can compete with the iPhone 4 and the massive ecosystem behind it; 555,000+ apps, too many cases to count, automobile integration, etc., etc. Windows Phone just may drive the wooden stake into the un-beating, blackberry heart of RIM, but it’s real challenge is to begin eating Android share. As Android gets more expensive and loses features due to patent infringement cases and settlements, the iPhone wannabe assemblers of the world will need something to load onto their wares in the vain hope of competing with Apple’s relentless pace of innovation.
[Thanks to MacDailyNews Reader “GetMeOnTop” for the heads up.]
I like their strategy… I like it a lot.
May Ballmer remain CEO for as long as it takes!
I believe Steve Jobs said (at MW ’97?) that there’s a “disease” at Apple, and that is for Apple to “win,” Microsoft has to “lose.” Clearly, that was fixed, and good goals were set. MS may need the same treatment, or they’ll keep deteriorating.
That’s Microsoft’s problem all along: they’re not content with merely having the most market share, they have a pathological need to totally monopolize a market and destroy other competitors, no matter what. Along the way they compromise on everything, including user experience.
Apple, on the other hand, is focused on making the best products, and making a tidy profit from it. Market share is secondary, but very nice to have.
When I was young (in the 80’s) I heard an interview with Indiana basketball coach Bobby Knight. Although I wasn’t a fan he said something that has always stuck with me.
To paraphrase: ‘Winning is not the goal. The goal is to play fundamentally sound basketball and play with 100% effort. Winning is just a result of doing both of those things well’.
Apple has been dunking on Microsoft for about a decade now.
Hahahahahaha
His own money?
Are you kidding. He’s probably so cheap that he wouldn’t spend unless it was someone else’s money.
“$230 a phone?!?!?? Fully reverse-subsidized?!?!”
I like Apple’s strategy. I like it a lot.
Reverse subsidized. Classic!
I wouldn’t totally dismiss or laugh off this lowball $99 price.
A main reason Android is so successful is the low price of many of it’s phones (and 2 for 1 deals) vs iPhone. Many buyers are willing to take “second best” if the price is right (look at Windows overall success in the past vs the Mac).
Often price is THE determining factor.
Yes, those cheap Android tablets are really flying.
Like Pigs…
Pigs on the Wing!
Great Floyd reference
There is always going to be a market for people who will settle for anything, as long as its free. Look no further than Windows users for proof of this.
Apple doesn’t want to play in that market. Those people are not their customers. Let MS have them.
Old german saying (which I have posted several times but warrants repeating) translates to something like: “If you want nice clean fresh oats be prepared to pay a fair price. If on the other hand you will accept them after they have been through the horse, the price will be considerably less”
Second best is the iPhone 4S, for $99, with a contract.
Third best is the iPhone 3GS, for free, with a contract.
Ballmer to Board: Don’t worry, I’ll make it up in volume.
Hey! If Amazon can sell tablets at a loss, Microsoft can sell phones at a much bigger loss.
I like Microsoft’s stragety. May Ballmer rule for as long as it takes.
I like Ballmer’s strategy. I like it a lot. It certainly shows just how desperate Microsoft really is with it’s “rounding error” market share.
Take my smartphone, PLEASE! It would be very shocking if there weren’t a lot of takers since there plenty of cheapskates always sniffing about for freebies. It would be horrible for Microsoft if there weren’t many takers, though. The good thing about it would be that such a program would definitely cut into the freebie Android market share and that would be a good thing for Apple.
$99?
The iPhone is free with some 2-year plans in Canada.
To increase Microsoft’s numbers, will Ballmer eventually give people $100 each to take a Windows Phone?
That actually wouldn’t surprise me, as Ballmer could then tout numbers of “units moved out of stores” at his next public appearance.
I wasn’t aware Canada had data plans for anything less than 3 years, unless you forfeit hundreds of dollars in subsidy. Which Canadian carrier/promo is offering a free iPhone for only 2 years?
It is an aggressive strategy. Taking money from a business you dominate (Windows and Office) and using to buy into one you want to dominate. Unfortunately for M$, Ballmer has no taste, little respect for his customers, and we know it.
But but but it’ll DO music, it’ll DO internet, it’ll DO email….
… and,
it’ll ‘squirt’.
Yuck.
To be fair, Microsoft didn’t intend to subsidize the Nokia by $230 per phone. Clearly, they have a marketing program with Nokia for $1B a year, just like Elop stated when he announced the adoption of WinPhone. So, each quarter, Nokia gets $250M, regardless of how many they ship or sell. If they want to maximize their profitability, perhaps they should just ship one Lumia a quarter?
I imagine Ballmer’s lieutenants calculated their subsidy based upon what Nokia was selling at the time, 10s of millions of smartphones, so, $250M might have worked out to about $10 a phone. Nokia used to be #1 in smartphone shipments, and based upon Apple’s 37M shipped, Microsoft may have figured Nokia would be shipping 40M by now, making that payment as little as $6 a phone.
Any which way you cut it, Ballmer likes his strategy, he likes it a lot!
Yep, the salesman is in charge.
It all seems bass-ackwards to me… paying the company that is making the device to market the device that uses your firmware to sell it to customers you hope will access your services and spend money on your other products? I would understand if they were paying nokia to build a phone for them that is compatible with their system etc, and then Microshit does the marketing etc, but this is messed up…
At some point, when the subsidy gets too large, this can no longer be legal, on anticompetitivity grounds. This is not the same thing as a provider subsidy, which is only a way of prefinancing the 2 year captive cell phone contract.
The Microsoft subsidy cannot exceed the Windows Mobile license fees, or M$ would be selling with a loss. Such an approach is prohibited in Europe. This won’t fly in quite a number of countries.
Spend it, spend it al!!!!
Will Microsoft get into the predicament where the money they make from Android patent licensing pays more than they make selling WinPhones?
Then what will they do?
Go Stevie! Spend until it hurt!! Spend until it hurts, a lot!!!
Yessss!
Do you think at some point, MS will remember its name, and start trying to make software for any OS?
Nah.
Well write the obituary RIM. My company is (Finally!) getting ready to move to the iPhone from RIM. The most significant issue is how to transition, because it is expected that everyone will show up on day one ready to trade in their BB.
My experience is that my company is at the end of the parade with regard to Tech, and it is now clear that BB is ready for the funeral, and organist is warming up.
Xbox redux. Apparently, MS just can’t come up with either products or strategy on their own. A pity it is that so long on top they used to sit.
Guess the problem is they can’t copy anybody anymore!
They are so far behind in the game that catching up is their biggest problem, Balmer should give it up, He has no strategy,
He never did!
No, no, no! The man is doing a fine job! A fine job indeed! Nothing wrong here…..he’s a visionary……he’s a genius…..he’s a……
Oh heck, I can’t even keep typing this with a straight face.
I would still spend at least $199 for any current iPhone. After 1.5 years and AT&T allows me to upgrade, I could sell my iPhone for at least $300 to upgrade to the current one. Windows phone will be an good for nothing by then.
Zune redux. ePhone, aka PhoneE.
Which $99 windows phone is comparable to the $99 iPhone 4?
When one is in enough pain, he will pay anything to get rid of it! How ya feeling Ballmer?
Isn’t Price Dumping (a big company with money selling their product at a loss to put competitors out of business) illegal?