Tech-giant Microsoft (NASDAQ:MSFT) knows what mistakes it’s made when it comes to the smartphone market and Steve Ballmer, the former CEO, said last month that the company would have been in a much stronger position in the phone market if they could redo the last 10 years.
Microsoft failed to do exactly the things that Google (NASDAQ:GOOG) did and each one of them turned out to be the right choice. While the Android maker chose to go after volume by offering the Android platform at no cost at all and also allowing the OEMs to fork the version as per their respective requirements, Microsoft chose to charge the OEMs for Windows Phone OS. Well, that ain’t going so well after all! So, what is Microsoft planning to do now? Read on!
Change in Microsoft’s Point of View
Last month at the Mobile World Congress in Barcelona, Microsoft had announced that two Indian phone makers – Karbonn and Lava (Xolo) - will be working on manufacturing Windows powered smartphones, aiming at the price-sensitive buyers. And now, Microsoft has decided to make an unprecedented move of offering its Windows Phone OS for free to the two manufacturers from India. What makes this move so shocking is that the company didn’t provide the OS free of cost even to Nokia (NYSE:NOK). But, it seems the company finally understands the sensitiveness of this move. However, this particular agreement is specific to the two companies only, though Microsoft is likely to offer the OS to other OEMs as well under similar terms.
- Warning! GuruFocus has detected 8 Warning Signs with MSFT. Click here to check it out.
- MSFT 15-Year Financial Data
- The intrinsic value of MSFT
- Peter Lynch Chart of MSFT
Why This Change, All of a Sudden?
The company has closely analyzed the situation and has understood in order to gain better market share, it needs to make its offering available to more and more consumers. In India, Microsoft Windows Phone has become the second most used OS after Google Android, beating Apple. This has managed to happen only because the consumers in the geographic region are highly price-sensitive and for them owning an iPhone becomes too expensive. With only two options remaining – Windows and Android - many decided to carry a Windows device, for whatever personal preferences.
What’s More in Store?
There are also rumors about Microsoft is in talks with HTC to cut or eliminate the licensing fees, only if the phone maker accepts the condition to include Windows Phone OS as an additional OS on its Android handsets, i.e. manufacturing dual-boot handsets with both Android and Windows installed in them, so that users can switch between them whenever they want. However, Google is not very happy about the proposal and doesn’t want for such an inclusion.
For some time now Microsoft was in negotiations with Karbonn and Lava, but it all worked out very recently only when the company decided to waive off the license fee. With this move, the Windows maker is also looking at a shift in its business model. Earlier, the company used to make money from the licensing fee and now that being out of the picture, it will have to focus on other parallel sources.
While a move such as this clearly hints at the increasing frustration of Microsoft, it is indeed an unavoidable one, if the company wants to sustain and grow in this highly complex and dynamic smartphone space. Previously, many OEMs, though wanting to make Windows devices, decided to restrict them to Android because dealing in Windows devices required expenses and they weren’t willing to experiment at that level. Now, with agreement such as this one, smaller players can start experimenting more with Windows OS and bring out more devices at affordable prices, resulting in a possible market share expansion for the Windows maker.