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What the Windows Phone Subsidies Flap Tells Us

Back when Microsoft bought Nokia's device business in September, Steve Ballmer suggested that he thought other device manufacturers would come out with more, rather than fewer, Windows Phones in the future.

At the time, it struck me as delusional. Nokia was already producing between 80 percent and 90 percent of Windows Phones and the figure seemed likely to run up to 100 percent now that Microsoft had brought that manufacturing in-house. After all, who would want to compete with the Microsoft/Nokia integration on a platform that's struggled to get to the No. 3 position, anyway? 

A new report suggests a mechanism for bringing Ballmer's wish to fruition -- big payments to other device manufacturers.

Russian wireless industry blogger Eldar Murtazin on Wednesday reported in Twitter posts that Microsoft had several support payments going out this year to major manufacturers to produce at least one Windows Phone device each. According to Murtazin's Tweet, the payments were $1.2 billion for Samsung, $500 million to Sony, $600 million to Huawei and $300 million to others -- for a total of $2.6 billion.

Top Microsoft spokesman Frank X. Shaw ridiculed Murtazin's unsourced report with a Tweet of his own that is a study in non-denial denial. Shaw wrote:

While Shaw is throwing cold water on the specific numbers, he sort of confirms the co-marketing and it's as possible that the numbers are off on the low side as that they are off on the high side. (It's even plausible that Shaw's Tweet is simply designed to sow doubt among the handset partners about how much Microsoft is paying each of them.)

In any event, it would have been less delusional for Ballmer to think partners would develop phones for his platform if he knew he was going to be throwing a lot of money at them after the Nokia buy.

Meanwhile, Microsoft's devices bet gets more entrenched as the CEO succession saga drags on.

Posted by Scott Bekker on January 16, 2014 at 1:29 PM


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