13 March 2014

Microsoft starts giving away Windows Phone for free, to compete with Android

Microsoft, following a few months of posturing and equivocation, has finally decided to give away Windows Phone for free. This move comes as Microsoft desperately tries to gain some mobile market share, especially at the low end against Android, which Google already gives away for free.

This data comes from industry sources cited by The Times of India. Microsoft never talks about the specifics of its licensing deals, as they vary from company to company, but we have no reason to believe that the Times report is false. From our own sources, we know that Microsoft has been considering giving away free versions of Windows Phone and Windows RT since last year, around when Terry Myerson took over as MS’s operating systems chief.

As it stands, Microsoft charges device makers somewhere in the region of $5 to $15 for a Windows Phone license. Under this new deal, two Indian phone makers Karbonn and Lava (makers of the Xolo brand) will be allowed to produce Windows Phone devices for free. Both companies currently make and sell a lot of Android phones in India, and curiously Karbonn is also slated to be one of the first OEMs to produce a phone that dual-boots both Android and Windows Phone.

According to Karbonn’s chairman, dual-booting is only now possible because “Microsoft has eased the regulations and is opening up its platform for other players.” Why would Microsoft suddenly ease up? We’re not talking about consumer convenience here yet again, it’s all about market share. Way back in October, there was a rumor that Microsoft was trying to get HTC to convert its Android phones into dual-boot Android/Windows Phone phones, on the understanding that the Windows Phone license would be free or cheap. Basically, even if these dual-boot phones are advertised primarily as Android devices, some users would surely be tempted to at least give Windows Phone a try and who knows, maybe they’d like it so much that they’d stick with it.

It’s also worth pointing out that Windows Phone 8.1 is due to be released in the next couple of months and again, a lot of its features are specifically targeted at picking up market share in developing markets. Windows Phone 8.1 brings dual-SIM support (vital for success in Asian markets), new support for low-end Snapdragon SoCs, and the ability to store apps on micro SD cards. All of these changes will allow for the creation of very cheap, low-spec devices. WP8.1 will also have the option of using on-screen buttons a feature that basically serves no other purpose than to make it easy for phone makers to take an existing Android device and whack Windows Phone on it.

Presumably, the goal is to grow Windows Phone’s market share in Asia and other emerging markets, and then to somehow swing back around to the West and leverage its new-found heft to make a dent. It will be interesting to see if Microsoft extends free Windows Phone licensing to other markets and also, whether it ultimately makes economic sense to give the OS away. There’s obviously the long-term hope that it will make the money back on services, such as Skype and OneDrive but just look at Google. Despite Android being present on upwards of a billion smartphones, Google’s Android-derived revenues are minuscule on the order of millions of dollars, not billions. Microsoft has a long, long road ahead of itself to try and replace the billions of dollars per month! that it makes from Windows and Office licenses.


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