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Microsoft wants to cut the price of Windows Phone devices in half
SMARTPHONE HOPEFUL Microsoft is trying to halve its Windows Phone device costs as it tries to drive up sales.
Microsoft's Windows Phone 7 operating system has, so far, been an embarrassment for the firm. Since launching it a year ago the company has publicly admitted that sales have been lower than expected, and now the firm is telling potential customers that the cost of making Windows Phone devices will fall by 50 per cent over the next year.
Andy Lees, head of Microsoft's Windows Phone division told Bloomberg that devices running Windows Phone could be produced for less than $200, with Microsoft's main focus being to increase the number of devices sold rather than gross profit margin.
Lees said, "We are supporting componentry that will allow us to go below $200," which sounds great until you realise Apple's Iphone 4S already costs less than $200 to make.
Interestingly, Microsoft's desire to drive down prices will mean that it will make less money from handsets. The firm's royalty structure means that it gets a percentage of the manufacturing cost of a handset rather than a fixed fee.
Microsoft has maintained a single chip vendor specification and Lees said that there is no plan to move away from Qualcomm for Windows Phone 7 or Windows Phone 7.5. There's no word on whether this will change for Windows Phone 8.
While Microsoft might suffer a financial hit if manufacturing costs of Windows Phone handsets decrease, what the firm really needs is the ability to say it has sold tens of millions of devices. The problem is that smartphone makers might not be too impressed with a sub $200 target for putting together a Windows Phone device. µ
Tags: Microsoft
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Low margins do not bode well for Microsoft. This is a company that has historically done poorly with such products.
Also, lowering costs cannot be done by diktat from the top—it has to come from innovative ideas introduced by competing players, as in the Android world. Microsoft cannot unilaterally order a price drop, because it simply doesn’t know how to make things cheaper. Android will always be ahead on this, because handset makers are free to come up with new ideas without continually getting Google’s blessing.
This whole cost and money talk is all nonsense. Who wouldn't want a phone that can install the internet? Who wouldn't want a phone that can browse the web? Who wouldn't want a phone that supports point and click? Who wouldn't want a phone that has cut and paste? Who wouldn
t want a phone that multitasks?
All of these things are so DIFFICULT if not outright IMPOSSIBLE to do with any other smart phone, so give me my LoseDoze Fone7!
Yes, the iphone costs less than $200 to make, but costs carriers around $650. Andy is referring to taking that 650 to under 200.
As I remember, years ago, Bill had this idea that hardware would become free while software would cost.
Nice future for a company like Nokia -
you provide the hardware for free and you pay us royalty for the software you have to make working on your hardware.
We are happy and with some luck even some consumers too.
I agree the Windows Phone isn't an I phone... i switched from Apple to Windows 6 months ago and i'm not going back... this is the best phone i ever had... (and it did pain me to say that yes :) )
For decades, M$ has striven to make Windows cost more in CPU cycles and memory bytes. This has resulted in customers having to buy new hardware (an Intel spokesperson once said "What Intel Give-eth, Microsoft Take-eth Away"). This process has driven PC sales and M$ profits.
Now this policy has come home to roost!
It's payback time...
Bill of Materials for iPhone 4S is $188. So, if M$ can drive down build costs below $200 they will have a phone that competes on price with iPhones; unfortunately for them though a Windows Phone is not an iPhone! LOL :-))