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STATEMENT: Microsoft's Windows Phone 7 sales off to a promising start
Posted by Arne Hess - on Tuesday, 21.12.10 - 17:39:05 CET under 02 - Windows Mobile News - Viewed 10002x
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Microsoft's very own News Center has recently interviewed Achim Berg, Microsoft's Vice President of Business and Marketing for Windows Phones. And while Microsoft was initially somewhat shy to release some sales figures, Berg has finally spilled the beans how well Windows Phone 7 is doing - or not. Berg arrived in his role this past summer and has spent time getting to know the team, his partners and the opportunities Microsoft has to re-establish itself in mobile. He made the move just as Microsoft was rolling out Windows Phone 7, which launched in Europe and the Asia Pacific region on October 21 and in the United States and Canada on November 8.

According to Berg, Microsoft is pleased that phone manufacturers have sold over 1.5 million phones in the first six weeks. Furthermore, he continued and said that Microsoft's developers have submitted and released more than 4,000 apps the the Windows Phone 7 marketplace; with more pouring in daily. Last but not least, Berg is very pleased with Microsoft's advertising. The company's campaign, with the "Really?" ads (for which Berg was responsible as he told the::unwired at an earlier meeting prior the Windows Phone 7 launch), is completely different advertising, and it's very gratifying to see the positive response Microsoft received. He mentioned that the campaign has been well-accepted and shows that Windows Phone 7 has been correctly targeted.

In terms of sales figures, Berg continued that the 1.5 million manufactured (and possibly sold to end users) devices have somewhat hit the expected sales figures and mentioned, that Microsoft's expectations are realistic for a new platform. Meaning that measuring for success is more long term than short term.

As an outlook for 2011, Berg said that the mobile market is a competitive one and therefore Microsoft has to compete on multiple fronts. Therefore, Microsoft will begin to releas the first of several Windows Phone 7 updates in the next couple of months as well as Microsoft is seeing a broader portfolio of devices from phone manufacturers at different price points; delivering Microsoft's commitment of providing customers choice.

Cheers ~ Arne

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Posted by benjitek on 21.12.10 - 18:01:57

The figure represents devices shipped to manufacturers, not the number that have been purchased by consumers. Activation numbers would be more telling. Even so, the number is very small considering it was an international launch.

Posted by Arne Hess on 21.12.10 - 18:06:55

Right, as I wrote: "the 1.5 million manufactured (and possibly sold to end users) devices". However, Microsoft is making its money from licensing the OS to the manufacturers and therefore they made some good money out of the "sold" devices.

Posted by Beholder on 22.12.10 - 02:15:14

Hmm, not really. According Gartner Microsoft charges handset manufacturers about $5 to $10 per phone to license WP7. Nobody knows what the net profit is but maybe 20 to 30%. So assuming they did not waive the fees anyway they made maybe 2 to 5 million. That is peanuts by Microsoft standards. If you factor in that the money they spent on the whole project will approach quickly 1 billion dollars including 500 million for marketing and subsidies they give the carriers and manufacturers they will not reach the break even in the next 20 years or so if they do not sell way more than that in much shorter time. But as long as Windows and Office sell well they can of course keep burning the money.

Posted by Arne Hess on 22.12.10 - 09:11:29

In terms of license costs, you might be right (even if I heard different figures) but Gartner might be better informed. Nevertheless, we have to see the whole ecosystem. As much as Windows Mobile was a great vehicle for Microsoft to sell Exchange licenses to companies, as good might be Windows Phone to continue in this area plus SharePoint which is new now. Furthermore we have to keep in mind that Microsoft is also making money from software and music sales as well as from the Zune Pass. Like for Apple (and partly Google) but unlike for Symbian (for instance), a mobile OS is way more than just the (license) revenue from the mobile OS.
In my humble opinion, the 1.5 million is quite a good start for a new and so far unknown mobile OS. Sure, you can always do better but in this case you could also do much worse.

Posted by Beholder on 22.12.10 - 21:09:35

I guess you mean 1.5 million. Not billion. :-) Given that WP7 launched with more than 60 carriers in more than 30 countries worldwide 1.5 million devices ordered by carriers (not sold to end users) in 2 months is actually quite a tiny number. Apple was selling more iPhone 4 in the US just in two days. I even wouldn't be surprised if Microsoft makes no money at all with the O/S licenses just to get into the market. They had a similar strategy for XBox 360. Their Entertainment & Devices branch lost about 4 billion dollars with it from 2005 to 2007 but kept going.

Anyway you are right about the ecosystem. It could be a cash cow in the future. But last time I checked Microsoft said it would not pay out any money to WP7 app developers until January or February so we just don't know yet. Kept me from jumping on the bandwagon (that and the half done APIs). But what we know is that they currently subsidize several companies to port their software over from iOS and Android. Profits from from music sales go largly to the big content providers. So it also stands and falls with the number of devices sold. Hence Zune never contributed significantly to the profits if at all 95% of which come from Windows, Office, and Windows server. Surely they have enough cash in the bank to keep spending.

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