One argument against it: Industry observer Michael Gartenberg thinks Microsoft won’t make its own mobile phone because doing so would potentially destroy its partnerships with companies that sell Windows Mobile-based devices, like Motorola (MOT), Palm (PALM), and HTC. “Microsoft now has traction with more than 20 million licenses out there and a great stream of partners and new phones for consumer and business use,” Gartenberg says.
The problem: Windows Mobile isn’t Windows, lacking both its market share and price tag. Those 20 million licenses don’t make much for Microsoft, which only charges $8 to $15 per phone, according to research firm Strategy Analytics. Even at the high end of that range, selling 20 million licenses in a year is just $300 million in revenue for Microsoft. That’s couch lint for a company whose sales are expected to near $70 billion next year.
Meanwhile, Apple (AAPL) just shipped 6.9 million iPhones last quarter for $4.6 billion in revenue. Plus whatever revenue Apple gets from selling “halo” Macs to iPhone owners, iTunes songs, and iPhone App Store purchases. Plus whatever goodwill synergy Apple gets with its other products, like using the iPhone as an awesome Mac remote.
So, about that Windows Mobile partner stream? Microsoft would have to sell 300 million Windows Mobile licenses — almost one third of the mobile market — at $15 apiece to near $4.6 billion in revenue. And that’s not happening next year, 2010, or any time soon. (Moreover, we’re not convinced someone like HTC would ditch Microsoft if it were still making money selling Windows Mobile phones.)
Can Microsoft build an iPhone? Probably not. But it doesn’t have to build an iPhone yet. It just has to build something better than the phones that currently run Windows Mobile, Palm OS, and lesser phones. Which can’t be be that hard, especially with the help of Danger, the mobile platform company Microsoft bought earlier this year.
What’s the payout? Even if Microsoft can sell just 1 million Microsoft-brand phones next year at a very low, $300 wholesale price — half of the iPhone’s — it could equal that $300 million in hypothetical Windows Mobile revenue. Plus commissions on app sales, a few pennies of search revenue from built-in Live Search, potential Xbox tie-ins, etc. Not the dumbest idea we’ve ever heard.
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