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View Full Version : Microsoft To Continue Licensing Fees For Windows Mobile


Ed Hansberry
10-01-2008, 12:00 PM
<div class='os_post_top_link'><a href='http://news.cnet.com/8301-13846_3-10055120-62.html' target='_blank'>http://news.cnet.com/8301-13846_3-10055120-62.html</a><br /><br /></div><p><em>"Microsoft plans to continue charging licensing fees from handset makers for Windows Mobile operating system and not follow the free offerings of Google and Nokia, reports Reuters. Microsoft charges $8 to $15 per phone, according to research firm Strategy Analytics, which sounds like shockingly high amount for a mobile operating system that's less than stellar, especially when you could get Android's decent (but not great) OS for free. "</em><br /><br />Not sure that should come as a surprise to anyone. In other breaking news, the oceans will be wet today.<br /></p>

andyb
10-01-2008, 03:53 PM
Not a surprise but it will become increasingly difficult for manufacturers to justify the cost.

Jason Dunn
10-01-2008, 05:12 PM
Not a surprise but it will become increasingly difficult for manufacturers to justify the cost.

Indeed, Microsoft has to provide tremendous value for that fee with the competition being free. Windows Mobile 7 had better rock...

Stinger
10-01-2008, 08:37 PM
Mircosoft is in a pretty tricky position here.

Charging $8-$15 makes sense for low volume, high end smartphones. Windows Mobile is adding value and the license fee can be tacked onto the price of the phone without many complaints.

However, even $8 is going to make a big dent into a manufacturer's profits once you hit the mainstream. Mainstream phones can sell tens of millions of units and who wants to pay $80 mil to Microsoft in license fees? Even if the alternatives aren't quite so good, they look increasingly attractive the closer the mainstream you get.

Pony99CA
10-01-2008, 10:06 PM
Not a surprise but it will become increasingly difficult for manufacturers to justify the cost.
Why? How much do PC makers pay to license Windows? Linux is free, so why haven't all PC makers switched to Linux?

I'm surprised people think Microsoft should give WM away. What would be the point in developing it? Let's see how Android helps Google's bottom line.

Steve

Fritzly
10-01-2008, 10:30 PM
Why? How much do PC makers pay to license Windows? Linux is free, so why haven't all PC makers switched to Linux?

I'm surprised people think Microsoft should give WM away. What would be the point in developing it? Let's see how Android helps Google's bottom line.

Steve

Synergies? Pushing other products you own?
I remember when MS was giving away Outlook for free in order to establish a presence in that segment of the market. Besides the main problem here is the delay with WM 7.
You can charge eve a premium price with something that is in high demand but it seems that MS is slowing down instead of accelerating.

Pony99CA
10-01-2008, 11:06 PM
Synergies? Pushing other products you own?
I remember when MS was giving away Outlook for free in order to establish a presence in that segment of the market.
That may work for some businesses, but it's harder for one under antitrust watch. Some people would complain about this being a loss-leader, trying to extend the Windows PC monopoly into the phone market.

IBM used to give its mainframe software away to help sell computers, but that got stopped in their anti-trust settlement, if I recall correctly. When I worked for IBM, we had to price software where we thought it would make a profit on its own. (It might not make a profit, but we had to have a good faith belief that it would.)

Steve

Kirkaiya
10-02-2008, 04:07 AM
Why? How much do PC makers pay to license Windows? Linux is free, so why haven't all PC makers switched to Linux?

I'm surprised people think Microsoft should give WM away. What would be the point in developing it? Let's see how Android helps Google's bottom line.

Steve

There is a very serious difference here - Windows on the desktop is an entrenched, near-monopoly. There thousands, or tens of thousands of business applications that run on Windows, and only Windows. PC makers would love, it seems, to switch to Linux (note that Dell, and Lenovo and others do offer it as an option) but realistically, it's an existing standard.

In mobile phones, Microsoft is not in anything like that position of strength: WM has a fraction of the total mobile phone market, less of the smartphone market than RIM, or probably Symbian. There are not any widely-deployed business applications that only run on Windows Mobile. Even OTA Exchange Integration is available for the iPhone, and (via other software) for RIM's blackberry.

This means that Micrsoft has to actually deliver $8 - $15 or whatever of added value, unlike with Windows, where most companies have little choice, given their existing base of apps. If Microsoft can't find a way to lower that cost, then as smart devices move downmarket (from costing $500 to costing $150), a $15 surcharge goes from being neglible to a 10% chunk.

There are compelling reasons why Microsoft should either drop it to $3, or give it away. Notably, Symbian's owners (mostly Nokia) have decided to open-source it, and give it away. Android is free, and open-source - and if you think this does not, in the end, lead to revenue for Google, then I think you underestimate them.

Google is thinking strategically. And this HTC/T-Mobile G1 is their first attempt. Think about where Windows CE 1.0 was, and how Palm users scoffed at it. Android could (and it might not) quickly add features, polish, and applications.

While it's true that it could fail, I also very much believe that Android could end up eating WM's lunch. I love my HTC Touch Diamond, partly because it hides WM beneath a slick shell. If there comes a time when I can install an "Android 2.0" on it that gives me the same features but better performance, and a more customizable UI, then I'd probably go for it.

Whatever Steve Ballmer says, I am convinced that this has put the Fear of Google into the WM team, and so hopefully WM7 will be a revolutionary leap forward, and not just "WM 6.5". I also believe that if they continue charging over $7 or $8, it will become the "Zune" of phone OSes, no matter how good it is. Good can be copied by Android, and made free. WM needs to be close enough to 'free' that the carriers don't notice the difference.

Stinger
10-02-2008, 07:52 AM
Why? How much do PC makers pay to license Windows? Linux is free, so why haven't all PC makers switched to Linux?

To add to Kirkaiya's answer, the bulk OEM licensing for the desktop version of Windows is heavily discounted. I wouldn't be surprised if Dell pays a similar price for Windows Vista Home Premium as Motorola pays for Windows Mobile Professional.

kdarling
10-02-2008, 04:53 PM
Here's why they use WM and WinCE:

1) Many companies shy away from open source / free code. They feel they have less liability if they pay for the use of something from another company.

2) Many companies can't afford to maintain an "free" OS. They happily pay MS's fee in return for not having to maintain the OS or always develop bluetooth, printer, wifi, keyboard, lcd, you-name-it drivers. (Might still have to do some work.)

3) MS has good development tools and documentation, with support.

4) MS has support for partner companies, from help with development and porting, to helping create custom homescreens like they did for the Shadow.

5) If you're a phone maker, one draw is that there are thousands of WM apps and programmers.

Now, it's possible that some companies will run dual OS platforms for a while. Perhaps, down the line, the lure of not paying royalties will work out when Android actually has a stable OS base and tons of apps.

Rocco Augusto
10-02-2008, 09:53 PM
I'm surprised people think Microsoft should give WM away. What would be the point in developing it? Let's see how Android helps Google's bottom line.

Steve

These are my thoughts exactly. Microsoft is in the business of selling software, it would be crazy to think they would just give it away for free because the competition is doing it. Microsoft's Windows Mobile platform is mostly targeted towards businesses since it integrates so well with Exchange. Even with Google giving Android away for free and even if some developer comes out with an Exchange solution for Android, business are going to be very wary of letting these devices on their network.

Would you rather have a Microsoft developed Exchange syncing solution on your handset or some third party hacked together one? Every network administrator I know that manages an Exchange server would want their staff accessing their networks with the Microsoft solution. Microsoft knows this and the handset makers know this. This is why they know they will sell more Windows Mobile handsets than Android handsets to businesses, where the real money is, and why they still continue to pay these fees today.

Consumers are rarely willing to drop more than a $200 on a device when they have a store full of less expensive options. Business on the other hand are more than willing to spend more for a device that will help them be more productive. Even if HTC sells 10 million Windows Mobile devices and pays 80 million in licensing fees, they were still able to sell all 10 million of those devices for about $100 more than they are selling their Android device in turn making a whole lot more money off Windows Mobile than Android.

Pony99CA
10-02-2008, 10:10 PM
This means that Micrsoft has to actually deliver $8 - $15 or whatever of added value, unlike with Windows, where most companies have little choice, given their existing base of apps. If Microsoft can't find a way to lower that cost, then as smart devices move downmarket (from costing $500 to costing $150), a $15 surcharge goes from being neglible to a 10% chunk.
Let's make it an infinite chunk. Given identical hardware, would you rather get a smart phone with some other OS free, or would you be willing to pay $15 for that phone running Windows Mobile?

I obviously think Windows Mobile is worth $15. Of course, I've also been using it (and its predecessors) for about 10 years, so I have a WM infrastructure (Outlook, ActiveSync/WMDC, etc.). New buyers may weigh things differently.

Steve

Pony99CA
10-02-2008, 10:12 PM
To add to Kirkaiya's answer, the bulk OEM licensing for the desktop version of Windows is heavily discounted. I wouldn't be surprised if Dell pays a similar price for Windows Vista Home Premium as Motorola pays for Windows Mobile Professional.
And what prevents Microsoft from offering volume licensing for Windows Mobile? They don't have to make it free to save OEMs money.

Steve

Kirkaiya
10-03-2008, 01:22 PM
Would you rather have a Microsoft developed Exchange syncing solution on your handset or some third party hacked together one? Every network administrator I know that manages an Exchange server would want their staff accessing their networks with the Microsoft solution. Microsoft knows this and the handset makers know this. This is why they know they will sell more Windows Mobile handsets than Android handsets to businesses, where the real money is, and why they still continue to pay these fees today.



That seems logical, except that RIM's blackberry is also not a "Microsoft-developed solution", and yet many, many enterprises have Blackberry's Enterprise Server installed to integrate with Exchange.

And why would a sync solution for Android be a "hacked together" one? RIM's solution is already 3rd party, and RIM has a larger share of the SmartPhone OS market than Microsoft does.

So if either Google themselves, or a Red Hat Software, or another credible company comes out with a reasonably-priced way of sync'ing Android with Exchange OTA (with push), then I think a lot of enterprise IT, which is sometimes driven by what other executives want, will put the software in place.

And the kicker is this: Most business smartphones aren't sold to large enterprises - they're sold to firms with fewer than 250 employees, which is where the vast majority of Americans work. This also explains why, as soon as the iPhone got Exchange-sync with version 2.0, we're seeing them pop up all over, in almost every mid-sized and large company I deal with (including Group 4 Securicor, Priceline, Brinks, etc).

I would go so far as to say that, even given the ever-changing definition of "smartphone", that most smartphones are sold to consumers, and it's consumers that drive most of the innovation in that space, not large corporations.

It's at Microsoft's own peril not to reduce the price of WM. I don't think it needs to be free, but it's going need to come down in relation to the hardware, or their small piece of the mobile OS market is going to get smaller. I don't know what that magic "price point" is, but I'd guess it's less than $5.

Rocco Augusto
10-03-2008, 08:36 PM
That seems logical, except that RIM's blackberry is also not a "Microsoft-developed solution", and yet many, many enterprises have Blackberry's Enterprise Server installed to integrate with Exchange.

And why would a sync solution for Android be a "hacked together" one? RIM's solution is already 3rd party, and RIM has a larger share of the SmartPhone OS market than Microsoft does.

RIM's solution has been around a lot longer than Microsoft's syncing solution though. By the time Microsoft came on the scene, RIM already had so much market penetration that it is less expensive for companies that have deployed RIM solutions to stick with RIM (even though this is how its sold, if companies looked at their monthly bills for usage they would see the Windows Mobile solution is a lot less expensive).

You are right, a solution wouldn't have to be hacked together. A larger company such as Novell or even Google could license ActiveSync technology to work with Exchange but then the solution couldn't be open source, because I doubt Microsoft would allow them to open source and solution they liscensed to them. To keep in the spirit of the handset you would expect a solution to be open source and from what I hear there are several developers already hacking together solutions. These solutions I doubt will be the ones that will be allowed on Exchange networks by network administrator.

It's at Microsoft's own peril not to reduce the price of WM. I don't think it needs to be free, but it's going need to come down in relation to the hardware, or their small piece of the mobile OS market is going to get smaller. I don't know what that magic "price point" is, but I'd guess it's less than $5.

I think $8 is perfectly reasonable for a device that is being sold to at a retail price of $399 or more. Also isn't Microsoft offering manufactures free upgrades (http://www.smartphonethoughts.com/news/show/21672/windows-mobile-6-upgrades-available-for-free-to-existing-vendors.html) to the platform if they offer the upgrade for the device? I know they were doing this with Windows Mobile 6 but I wonder if that policy is just in place for all upgrades. If so, $8 for the Windows mobile operating system and an upgrade is a great deal. Though releasing updates would cut into the manufactures profit margin since they wouldn't sell as many new devices.