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Microsoft's $1 billion smart phone bet? That's chump change
Microsoft is rapidly developing Windows Phone 7, a smart Phone platform to compete with iPhone, Android and BlackBerry. It's due this fall, though we don't yet know the dates, prices and carriers. We do know one thing, the launch will be massive. Like billion-dollar massive.
To be sure, Microsoft isn't starting from a comfortable position here. By killing off its earlier smart phone OS, Microsoft signalled that it's willing to fight to the death (in this market). And it's starting the fight on its back. So, how much is this insane mobilization going to cost the one-time alleged monopolist? A billion? More?
TechCrunch cites Deutsche Bank telecom analyst Jonathan Goldberg, saying that the company will spend $400 million on marketing alone this year. The total spent out of Microsoft's pocket could top $1 billion including development. Goldberg is quoted saying that he was told that between Microsoft and its carrier and hardware partners, "billions" would be spent. In the first year.
Super-keen Microsoft watcher Mary Jo Foley says a billion "would be a small price to pay" for Microsoft to get back in the game, citing its $62.5 billion 2010 revenues and its increasingly noticeable "lack of a credible and coherent answer to the iPhone and Android."
(Msnbc.com is a joint venture of Microsoft and NBC Universal, but nobody is telling us how much the company is spending on its Windows Phone 7 launch.)
So, what does a billion dollars mean in the wireless world? A few years ago, it might have been significant, but now, it's just pennies in a very large pig. Here are some numbers to put it in perspective:
$1.2 billion - the amount HP paid to acquire Palm, a fairly bustling phone maker with a promising operating system and phones already in the market
$1.5 billion - a conservative estimate of how much Apple made selling the 8.4 million iPhones it reported selling from April through June of this year
$8 billion - the approximate amount raked in by the sale of 61.6 million smartphones worldwide in that same quarter, just a three-month period, as tracked by Gartner
$13 billion - the amount Microsoft spent across all divisions on sales and marketing last year (R&D cost 'em $8.7 billion)
$15 billion - the amount of money that RIM, maker of the No. 1 selling smart phone platform in the U.S., grossed worldwide during its fiscal 2010 selling BlackBerrys and pretty much nothing else (with profits of $2.48 billion)
$40 billion - a fair guess at the annual total revenue that smart phone sales will bring in this year, based on average prices and current sales projections from assorted analysts
$250 billion - the amount of money carriers will take in from selling wireless data service alone — not counting text messages! — by 2014, according to iSuppli (Hint: this is why carriers will help sell these phones, with subsidies, revenue sharing or any other back-room deal that gets worked out)
Almost forgot one figure:
$1 billion - a very conservative guess at how much money Microsoft lost by developing and then killing off the Kin not-so-smart phone, according to Foley, including a $240 million write-off when the project was killed
So yeah, a billion dollars, Microsoft? Just a billion? I'm no accountant, but if you want to get back into this business, you're going to have to spend till it hurts. A billion is what we'll politely call "a good start."
as seen on msnbc
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