Microsoft, Ready to Spend Billions on Mobile, is Still Stuck in a PC Mindset

Last Updated Aug 27, 2010 5:36 PM EDT

Microsoft (MSFT) is prepared to spend billions of dollars on its Windows 7 phone. The cash will build up the ecosystem of developers and manufacturers. But no matter how much money it throws at this project, Microsoft won't succeed if it doesn't ditch the old PC mindset and release Windows 7 mobile without a licensing fee.

Four years after Apple (APPL) reinvented the mobile space with the iPhone and two years after Google (GOOG) claimed a big foothold in the market with its Android operating system, Microsoft is still without a major mobile offering. Its one effort, the supposedly social Kin, was a short lived disaster.
Luckily for Microsoft, the market for high end mobile phones is expanding rapidly. ""It's still wide open," Jonathan Goldberg, a telecommunications analyst at Deutsche Bank (DB), told TechCrunch. "They don't have to take share from Android or Apple, so long as they can attract enough consumers switching from feature phones."

Microsoft has been paying app developers to ensure that the marketplace for its phone is flush with offerings when it debuts. It has also committed significant funds to subsidizing the "non-recurring engineering" costs that handset companies have spent on creating unique phones for Windows 7.

But Microsoft is sabotaging this massive investment by continuing to charge manufacturers a $15 licensing fee on every handset sold. According to TechCrunch, of the eight handset partners Microsoft announced for the Windows 7 phone in February, just three -- HTC, Samsung and LG --are left.

Google's mobile OS, Android, is free. Apple and RIM make an integrated software and hardware package. As Henry Blodget writes over at Silicon Alley Insider, "Microsoft's mobile business is now stuck in the middle -- caught between free software on the one hand (Android) and integrated hardware-and-software units on the other (Apple and RIM)."

Android's incredible growth shows what a free, open system can achieve, even when it's not as clean or classy as the competition. Despite persistent rumors, Apple has yet to bring its iPhone to multiple carriers. If Microsoft removed its licensing fee it would spread to more carriers, grow its user base faster, and recoup the lost revenue on ads and apps. If it persists with its PC mindset, it will cripple its ability to play catch up.

Image from Flickr user wfyurasko
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  • Ben Popper

    Ben Popper writes at the intersection of culture and technology. His work has been published in the NY Times, Washington Post, Fast Company, Rolling Stone, The Atlantic and many others. He lives at www.benpopper.com.