Microsoft Prepares To Kill One Of Its Biggest Cash Cows

Microsoft is waiving the licensing fee it normally charges for using Windows Phone for two Indian smartphone makers, The Times Of India reports.

This is a radical change in philosophy for Microsoft, but it doesn’t really have much of an option. Google has forced Microsoft into this position.

Microsoft became Microsoft by charging manufacturers for using its Windows operating system for desktop computers. It tried to do the same thing in mobile charging handset makers $US10-$20 per handset.

Google destroyed Microsoft’s Windows business model by giving away Android. Android, which was out ahead of Windows Phone, and took over the world, is free, give or take some patent fees.

With Android popular with consumers, and Windows a flop with consumers, handset makers have no incentive to pay Microsoft for Windows Phone.

Microsoft is also rumoured to be giving up on Windows Phone fees for HTC, Sony, and ZTE.

The smartphone market is incredibly competitive. The only two companies that are really making money are Apple and Samsung. For everyone else margins are razor thin. Therefore paying Microsoft for something they get for free from Google makes no sense.

This has led to Android taking over the world. Microsoft used to control 95% of the computing market. Now,it’s at 24% and Android is at 60%.

At MWC, the big mobile industry conference, there was a bunch of cheap Chinese phone makers all using Android. There was almost no Windows Phone at displays for companies attacking emerging markets.

As a result, Microsoft has no choice but to stop charging for Windows Phone.

The Windows Phone business has never been huge for Microsoft. But, this could turn into a slippery slope for Microsoft.

If it stops charging for Windows Phone, will it stop charging for Windows for tablets? After all, Android is free for tablets, and it’s taking over tablets. And if Microsoft stops charging for tablets, will it stop charging for Windows on the desktop? After all, Microsoft says a tablet is the same thing as a PC, just in a new form factor?

What we’re seeing here is likely the start of the end of the Windows business as we’ve known it. For years, people have predicted this would happen, but this time really feels different. This time Microsoft is actually going to kill its Windows cash cow.

But! It’s not all bad.

This will force Microsoft to think of a new way to monetise its products. It will force Microsoft to approach the entire market from a different perspective, and that could lead to something bigger and better.

New CEO Satya Nadella talked about this recently saying, “When you have a $US70 billion business, something that’s $US1 million can feel irrelevant. But that $US1 million business might be the most relevant thing we are doing.”

There’s a lot of ways to read that, but we see it as willingness to think about Microsoft differently than in the past.

(And, for what it’s worth, Windows has been going sideways since 2011. Microsoft has still grown revenue thanks to its Servers and Tools group. It’s a diverse company.)

Via: The Verge

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