Microsoft to pay OEMs $2.6 billion in 2014 to make Windows Phones

“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 [bribes – MDN Ed.] Ballmer offered to Finns,” Stasys Bielinis reports for Unwired View. “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,” Bielinis reports. “That’s $2.6 of hard cash doled out to smartphone vendors to push WP8.”

“On the other hand, except for Samsung, none of smartphone OEMs are doing that well,” Bielinis writes. “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.

Read more in the full article here.

MacDailyNews Take: You know you have a strong platform when you have to bribe people to use it.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]


    1. “Windows Phone a major part of their smartphone strategies”

      That’s the problem, and MS don’t realize or accept; any[thing] mobile strategy that includes the [bad [reputation]] word ‘Windows’, will NOT work out.

      Whether in the mobile OS name, mobile device name, mobile product name, the word ‘Windows’ has to be dropped [fast].

      Not only is the word worn out and used sice 1981 (about 32 years ago), it is/was mostly a [desktop] PC OS, now unfit and incompatible with nowadays mobile mind frame.

      I would do that first thing in the morning if I was in charge.

      Good luck OEMs!!

      1. That is a big problem with some brands who have prior negative connotations. I saw some new Ford trucks that seem to have a newer logo on them and I subconsciously and conciously find them more appealing as a result. Normally I like classic logos (like Warner Bros. shield logo, one of the best) but Ford’s standard grill logo suggest something cheap and shoddy to me because of prior association. So I won’t buy (plus they use Microsoft Sync, how clueless is that?).

        You’re right, they need to drop the word “Windows” but the marketing guys are in charge so they would scream at that idea and so doubtful. It will probably still be around to be chiseled on their grave stone.

  1. You know as an Apple fan I’d like nothing more than M¢ to disappear as the next, but I really do hope the next their next CEO understands they’re a software company. I hope he cuts loose their software programmers to write great software for today’s relevent platforms. Dudes, you’re NOT a hardware company, let it go already.
    Go Apple!

    1. Ironically.. they are doing exactly what you suggested… well, the “Go Apple” part.

      They might never survive as a Software company, since everything is going FREE these days. They are being forced into this position and, yeah, this might get very ugly, very fast for MSFT.

    2. We NEED Microsoft though. When it’s on its bankrupt knees and begging for change, Apple will need to bail them out just so consumers know how good Apple is compared to the competition.


  2. You know this somehow makes Mickey Dull’s saying “I’d shut it down and give the money back to the shareholders” seem intelligent.

    The MS innovation is clear “Give money to strangers until we have to shut it down.”

    I like this strategy, I like it a lot. The next CEO will sure have something large to fill, and it won’t be shoes.

  3. If I were a manufacturer of Android phones, but not called Samsung, I would know that I’m not making any money from selling smartphones and would be very interested in taking money from Microsoft in order to subsidise production of Windows phones. By making something that isn’t just another Android phone, I would be able to differentiate my product and hopefully do better than at the moment.

    However Microsoft has bribed Samsung with more money than any other company, so Samsung will have an excellent chance of dominating that category too. It’s hard to imagine that other manufacturers are going to fare any better in a Samsung dominated Windows world than they do in a Samsung dominated Android world..

    I think that Microsoft has made a mistake by making the bribes too widely available and in particular by bribing Samsung. If Microsoft had confined their bribes to just a couple of companies, such as Sony or Huawei, then those companies could have made clearly differentiated products that might have done well in the markets. By bribing everyone, they don’t allow anybody to differentiate other than by price – and we know where that leads.

    The other effect of these bribes will be to considerably erode Nokia’s current position. It’s obvious that Nokia’s market share will fall, but any Apple observer should know that market share isn’t all that important, however the key thing for Nokia will be whether their sales increase or reduce. My feeling is that Nokia’s sales will diminish once they encounter strong competition, which would be bad news for the owners of Nokia – who are the ones bribing Nokia’s rivals to compete with them.

    Microsoft desperately needs to find somebody who will accept the CEO job. The way that things are going, there will be nothing left for the new CEO to run. On the other hand, as an Apple investor, it’s good to know that Ballmer’s hand is on the steering wheel and will remain there for some time to come.

    1. That is so right, even more desperate than I had thought. Fact is even if they did generate greater market share for WP8 and even managed to hold on to much of Nokia’s sales all it does is keep them in the market it does nothing to help them actually make money out of it just puts them into the position of all the OEMs who make practically nothing from phones. They clearly hope to try to generate an Apple like infrastructure but I cannot see that happening even if they get past part 1 of the plan. As things stand their mainstream income is going to falter long before they can generate new streams by throwing the cash in all directions. And you just know that Samsung is only in it for itself, only they can help Ms achieve its aim and yet there is no way that they will do so for all they are doing is covering their ass so that as you say if there is going to be a WP8 market they will dominate it while being paid by MS to defeat them. Laughable strategy but then MS still like so may analysts think that they pull all the strings so they just may be as stupid as desperate enough not to see it i guess.

  4. Michael A Robson said: They might never survive as a Software company, since everything is going FREE these days.

    I can’t find the reference but I believe that in an interview around the time of his second coming, SJ said that software would tend towards free, or at the very least low cost (=unprofitable), whilst Hardware would always have a price and therefore potentially a profit element.

    As in so many things the guy was right.

  5. @AlanAudio: The problem for MS in finding a new CEO is that Gates is still hovering in the background. How many really good candidates are going to take the job knowing he’s going to be around to second guess them or, quite possibly undermine them. The job is one huge poisoned chalice.

    1. Quite right. That’s why I used the phrase ” find someone who will accept the CEO job”.

      In any other company, there is a carefully worked out succession plan, but Microsoft either do not have one, or the successor has told Gates where to stick his job. Also in any other company, there would be no shortage of well-qualified people vying to get the job, but the set-up in Microsoft with Gates and Ballmer sitting on the shoulder of the next CEO means that they have little chance of changing the things that everybody can see need to be changed.

      In short, the smart people who might be the CEO that Microsoft really needs aren’t so stupid that they will accept the job, while the people who want the job are not the sort of people who could solve Microsoft’s problems.

      Gates and Ballmer got the company into that mess and Gates and Ballmer will stop somebody else from digging them out of that mess.

  6. Now there’s a fine business strategy. Let’s do the math. Estimated Winphone sales are about 36 million per year, of which Nokia sells about 80% leaving 7.2 million for these subsidized sellers. $2.6B/7.2M = $361 per phone just to pay for the subsidies. Even if you stretch the subsidies out for 3 years, that’s still $120 per phone in profit required just to pay the subsidies. They’ll probably give the phones away at cost or a loss to boot. BWAHAHAHAHAHAHA nice plan. Jaheezsus. What is wrong with those people?

  7. This is a totally unviable strategy. The base they are using to finance it is seriously under threat itself so milking it is a dangerous strategy and the OEM’s having been used by MS for all these years are simply feeding on its flesh for their own benefit. For they are not stupid enough to think that a) its going to last should it ever succeed which could put them back in in a worse state than purely with Google and b) they have no intension of allowing WP8 ever to replace Android/Chrome in their portfolios for very good reasons.

    They are simply taking the money to try to create a bargaining position against Google as and when they need it (and while they produce their own longer term aims) but would never even do that much unless they are paid to continue to do so. So Microsoft has to hope this has a very quick boost to market share to encourage people to buy Microsoft phones, but even then as the money to back it starts to eventually run dry all the external support will fade again. Microsoft no doubt hopes that will leave them with a strong if niche position for themselves but more likely it will start to collapse in on itself as its former partners plunge the stilettos as pure competitors again.

    This smacks of desperation but then I guess thats all Microsoft has in its locker right now.

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