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Forecasting Nokia's Windows Phone sales and Microsoft's mobile customer acquisition cost

Our agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft. In the first quarter 2012, we received a quarterly platform support payment of USD 250 million (approximately EUR 189 million). We have a competitive software royalty structure, which includes minimum software royalty commitments. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US Dollars. The total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitments.

From Nokia’s Q1 2012 financial interim report

The figure of $250 million for Q1 is the same as the amount Nokia received for “platform support” in Q4 2011. This means Microsoft has paid $500 million over two quarters. During the same time frame Nokia shipped approximately three million Windows Phone devices. The average cost to Microsoft to acquire a Nokia Windows Phone user is therefore $167 per user. This is down from $250/user in the last quarter.[1]

If the royalty is equivalent to a license fee then the more interesting question is how and when will the royalty payments nearly match the platform support payments as expected. This might give us an estimate of what both parties are expecting from the relationship.

If the payment schedule of $250 million per quarter is maintained through 2014, Microsoft will have paid $3.25 billion to Nokia. This is well within the “billions of US dollars” range that is cited above. (The minimum would be $2 billion which would mean payments through the end of 2013).

We also need to estimate the royalty payment structure. One figure that has been circulating for a long time is that Microsoft prices Windows Phone (and its antecedent Windows Mobile) at $15/unit. It’s an aggressive price point for a mobile software license and should be subject to volume discounts but let’s assume it’s correct. If it is correct then the only remaining question is how quickly will Windows Phone units grow at Nokia?

One way to begin is to calibrate WP growth to iPhone growth. For the first two quarters iPhone and Lumia have sold at rough parity.[2] iPhone sold 1.4 million in its first quarter (including opening weekend sales of 270k in previous quarter) while Nokia sold “approximately” one million Lumias in its first quarter[3]. In the second quarter Nokia cited 2 million Lumia units and Apple had 2.3 million iPhone sold in Q4 07. So far Lumia is slightly under the iPhone ramp, but let’s give it the benefit of doubt.

If we  apply iPhone growth rates to Lumia then we have the following sales forecast for Nokia’s Windows Phones:

This looks like healthy growth, as was the iPhone’s. However, this “iPhone growth” pattern only results in about $1.4 billion in payments in exchange for $3.25 billion from Microsoft, leaving a deficit of $1.9 billion in the “platform support” balance.

To erase the deficit, I tried an approach where I assigned 3 million and 4 million for Q2 and Q3 shipments respectively then applied a constant (y/y) growth rate thereafter. Solving for a figure of growth which results rough parity with platform support payments gives us about 250% growth. The resulting sales profile looks like this:

This ramp would result in 210 million Windows Phones shipped over about three years. It would also generate nearly $3.2 billion in “royalties” for Microsoft offsetting $3.25 billion in “platform support” payments by Microsoft to Nokia.

There are many assumptions in this, royalty rate and length of contract chief among them, but the key question should be a sanity check: is this a feasible product ramp. It’s certainly far faster growth than Apple has been able to achieve. On average Apple obtained about 160% quarterly y/y growth. It also exceeds the growth rate that Samsung has been able to achieve (165 to 170 million smartphones shipped from a standing start three years ago). It implies 150 million units shipping in the third year of sales and nearly 50 million in a peak quarter. It assumes perhaps as much as 20% market share in smartphones in 2014. It’s certainly ambitious.

But even if it’s achieved, it’s only a break-even point for Microsoft’s relationship with Nokia. It would imply that payments to and payments from Nokia would be in balance. The road to (dare one say it?) profitability for Microsoft in mobile would just begin to be visible at that point.

Notes:

  1. What the quote above also reveals is that Nokia is also expecting to pay back some of these “support payments” in the form of “royalty payments” for the software. That’s an interesting word choice as usually an OEM would pay a license rather than a royalty for software. I’m not sure if this implies anything but it may.
  2. See also Charles Arthur’s analysis of comparable growth ramps for mobile phone platforms here.
  3. This figure was cited “to date” in a March statement so actual calendar Q1 may have been less, perhaps 650k.

 

  • Bernardo

    This is when we focus only on Nokias. Do we know if Microsoft offer “platform” support for other WP vendors? What about carrier deals?

    The others sources of money I can see are apps…but if we look at Apple we can assume that’s breakeven at best. Content also isn’t one of MSFT best suits. 

    There’s also ads on Bing, but the Search division has been bleeding for a while. But Microsoft if patient, we all know that.

    • http://www.asymco.com Horace Dediu

      Microsoft is indeed patient. Its mobile efforts began in 1998.

      • kankerot

        From Nokia 20-F

        Nokia is also getting paid by MS for the amount of engineering work it commits to the O/s platform. Nokia is developing features that will become part of the o/s.

        So it’s a convoluted arrangement. MS pays Nokia to develop windows phones and for some development of the O/s. Nokia then pay MS a licence fee dependent on unit volumes subject to a minumum payment.

        If WP does not take off then Nokia is left looking for a new ecosystem and MS goes back to the drawing board having been here before.

        If WP does take off what chances are MS licence fees start to rise and cut into Nokia profits?

      • https://twitter.com/#!/reda_ek Reda

        if it does not work out, I don’t think Nokia has enough cash to make any significant turnaround (if volumes don’t pick up Nokia might have less cash than it’s 4.7B).
        MS is in the same position. They might have 2 cash cows, but they cannot ask OEMs to pay any fee if Android is supposedly free. The alternative is to buy an HW manufacturer and do things the “Apple” way but I think this approach will not yield any result (they want to target the mass market so you need OEMs)
        So, they both need each other at this point. Nokia knows this, I don’t think MS does.

      • Walt French

        “Microsoft is indeed patient.”

        Horace, I’m always impressed with your command of English—miles…uhh, kilometers ahead of my ability to grunt in a couple of languages. But I’m afraid it’s let you down here.

        In his Devil’s Dictionary, the humorist Ambrose Bierce describes how English-speakers (in America, anyway) conjugate adjectives by person. My favorite example: I am principled; you are strong-willed; he is pig-headed.

        “Patient” also has multiple forms: I am far-seeing; you are patient; he is “stuck in a rut.” The corporate-third-person form is “Microsoft is locked in the sunk-cost fallacy, pouring good money after bad, down a rathole.” (Yes, there are multiple forms.)

        Now I know Microsoft has other interests in WinPhone/Win8, as well as having touted lining up Samsung as a prospective partner, with the obvious intent (and possibility) of undercutting the sole significant Android partner. And there may be some creative accounting going on here to minimize the appearance of that old monopolist trying to illegally leverage their desktop monopoly into phones.

        But I can’t imagine that there’s a Finance person on the planet who would bounce your required growth numbers — which look “tippy-top best case” to me — against current markets, then conclude that Microsoft was making a sane business decision, let alone a good one. Just heard your recent Critical Path where you mentioned a $300 million error that went uncorrected; here is one at least ten times as big.

        So I think your imperfect English is drawing us away from a story that’s even bigger than the pending collapse of RIM and the probable failure or at least dismemberment of Nokia. Patience, as you know so well, is not a virtue when things are going badly and shouldn’t be called as such, even when you are being typically thoughtful and courteous.

        ;^>

      • http://www.asymco.com Horace Dediu

        Sorry, but I lost you. What is the error in grammar and how should it be corrected?

      • Walt French

        My sincere apology to you, Horace (and all others who didn’t catch my attempt at humor). I was merely saying that “patient” was too generous in characterizing Microsoft’s fielding a “me too” product. I know that you have clearly said an asymmetric effort is needed. 

        Generous, to the point of obscuring a question that really needs to be asked: how can Microsoft, which has historically disrupted markets (it was YOU who noted WM’s role in disrupting the previous phone value stack with a then-radical OS), managed to believe WP will somehow break above a 5% share?

        The original Bierce joke relied on English’s notoriously irregular verb forms (I am, you are, he is…) to call out how we are biased in characterizing or understanding ourselves and others.

        In this post, you have done your typical insightful, first-class analysis. As part of it, you left it to readers to assess the likelihood of Microsoft/Nokia achieving those numbers (which is a courtesy to help us fire up our own brain cells; no complaint). Then, however, you passed up an opportunity in replying to a comment, to say why a business has such an unlikely Plan A, with no obvious Plan B. 

        I can see how Nokia stumbled into it (although not quite understanding how a market leader could’ve let 2009 and 2010 developments go unanswered). But Microsoft, which had no reason for complacency, first built a tortoise-like response, and then wasted resources on the Danger/Kin disaster, before offering a very leaden, ho-hum product.

        I personally subscribe to the notion that WP7 is a beta product to keep the faithful, while they plan for WP8 to be the Big Deal. Maybe they’ll even offer huge rebates and arrange for AT&T to waive early upgrade fees, to compensate for the likely incompatibility between the Lumias and WP8, to show how serious they are. 

        And yet, WP 7 and 8 only show two minor differences from incumbents’ 2011 capabilities: (1) a nice interface that promises smooth linkage between non-existent apps; and (2) an office- and Office-friendly synch service that could actually be a negative for consumers who don’t want to be part of The Matrix. Neither is anywhere close to disruptive, nor can I see how anybody would expect them to be.

        Surely WP Product Marketing also knows that WP7 is not a big consumer product, because they have done little to build awareness, even releasing their latest effort into a weekend with a built-in excuse for zero enthusiasm; I believe we also saw the resignation of the WP Marketing head, hardly a good sign of enthusiasm/commitment.

        So why, I wonder, is Microsoft sleepwalking? When will they wake up? Who will be Ballmer’s Burning Platform successor?

      • http://www.asymco.com Horace Dediu

        My explanation for Microsoft’s behavior is that they believe at their core that software, separated from hardware, is the point of value capture in any computing system/architecture. They are inherently believing in modularity and compartmentalization of value, with the bulk of value condensing around the API provider. They are inherently dismissive of integrated “systems-based” value capture.
        This is in spite of anomalies like the MP3 market, the console market and the (to date) mobile phone markets. These “post-PC” systems have avoided the value architecture of the PC but Microsoft doggedly clings to “someday” the value chains reverting to their favor.
        I don’t believe there will be any change in this core logic unless there is a broad and deep change in management.

      • Secular_Investor

        Me Too. I didn’t follow Walt’s grammar point.

        But I thought you were being sarcastic – and I found it funny!

      • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

        I’m not understanding the criticism either. I thought Horace’s comment was tongue in cheek and quite witty. (And for what it’s worth, Horace’s command of English is better than many native speakers, in my opinion.)

      • https://twitter.com/#!/reda_ek Reda

        Yes, patience (i.e. big bank accounts) is surely a virtue but I think sometimes you need to risk and cannibalise your own business to innovate before your competitors. Nokia is now paying the price for Symbian, when do you think MS will pay the price for Windows?

      • aftoy

        MSFT can afford to be persistent. MSFT will prop up NOK, one way or another. MSFT needs Samsung so expect some sort of sweetheart deal. Samsung quite successful without WP7.

      • Secular_Investor

        “Microsoft is indeed patient. Its mobile efforts began in 1998.”

        LOL

        And so far their market share has collapsed to around 2%, despite the countless billions they are throwing at their “mobile problem”.

        I will always remember Ballmer’s intitail reaction to the iPhone: 

        “HA! HA!” He sneered ” $500 …the most expensive phone in the world and it doesn’t appeal to business customers…  it doesn’t even have a keyboard!”

        youtube(dot)com/watch?v=nXq9NTjEdTo

      • http://www.asymco.com Horace Dediu

        My favorite Ballmer quote is far older, from 2003: http://www.asymco.com/2010/02/23/100-million-mobile-windows-devices/
        And another one from early 2007: http://www.asymco.com/2011/03/07/on-android/

  • Paulo_Silva

    I dare to say MS didn’t envision any profitability coming from this partnership with Nokia for short/medium term in the first place. Getting a deficit of $2 bn for grabbing such a foothold in the mobile market would mean a great achievement for MS in the long run. Way better results than what they’ve got by buying Skype for $7 bn. MS will be pretty happy if they can get a growth profile like iPhone did. They would pay even double that to get even half of that iPhone growth.

    Nokia has more in stake than MS has. Let’s see how this partnership will play out for them.

    • capnbob67

       It will be even less profitable when they have to buy Nokia to keep them in the WP7/8 game.

  • sfmitch

    “(including opening weekend sales of 270k in previous quarter)”

    I don’t think it is accurate to use the phrase ‘opening weekend’ sales as that number is unknown (outside of Apple).  The 270k sales were for Friday and Saturday only.  Sunday (July 1, 2007) was the first day of the new Quarter.  I think we can all agree that the weekend includes Sunday.

    • Joe_Winfield_IL

      While technically correct, that seems like a minor quibble – especially given that the data point was only used as a rough comparison to project sales of another device.  If the article were about 2007 iPhone sales, it would be a different story.

  • normm

    I think there’s already evidence that Nokia Windows Phone is not ramping anything like the iPhone.  Last week when I checked, the Lumia 900 Black was #1 in Amazon’s “Cell Phones with Service Plans” and #47 in “Cell Phones and Accessories”.  I just checked, and the respective numbers are currently #4 and #482. The iPhone remained a hot phone much longer.

  • normm

    I think there’s already evidence that Nokia Windows Phone is not ramping anything like the iPhone.  Last week when I checked, the Lumia 900 Black was #1 in Amazon’s “Cell Phones with Service Plans” and #47 in “Cell Phones and Accessories”.  I just checked, and the respective numbers are currently #4 and #482. The iPhone was hotter longer.

    • http://kaizenity.blogspot.com/ FalKirk

      I’m not sure that Amazon rankings can be used as a metric. The Xoom was #1 on Amazon for months and it turned out that the actual sales numbers were pathetic.

      I’m sure the Amazon numbers are accurate and honest but there computations contain too many unknowns for us to ever assume that they are representative.

      • normm

        Being #1 in non-Apple cellphones for a week probably means more than being #1 in non-Apple tablets.  Being #4 now below some well-known Android phones, and above some others, probably brackets the rate of sales pretty closely (at least in the US), since the rates of the other phone sales are probably pretty well known.  Going from #47 to #482 in the more general category suggests a pretty big drop in sales, and we may be able to find items above and below it that we can guess their sales pretty accurately.

  • kankerot

    Not looked at MS latest quarterly report but how does MS account for the $250m in their accounts?

    Also I was under the impression that the support payments would run for one year. Also it was mentioned the licence costs were $27 but perhaps they have a tiered depending on what part of the stack you required.

    • http://www.asymco.com Horace Dediu

      If the payments would run for one year then they would not add up to “Billions”. $27 would make the software the most expensive component in the phone.

      • kankerot

        No it would not. Isuppli teardown – $27 memory, $58 display & touchscreen, wireless section $38.

        Granted the $27 was rumoured and never verified. As to the billions – time will tell if they do become billions and as it is public knowledge other manufacturers reaction will be interesting.

      • Tatil_S

        I don’t think there is anything wrong with software being the most expensive component. It is probably the biggest differentiator in a smartphone, so assigning a high value and cost to it. 

  • Westechm

    I wonder how many phones are in the pipe line vs in the customers’ hands

  • http://kaizenity.blogspot.com/ FalKirk

    How much money is Microsoft losing on Windows Phone 7?

    – They’re paying money to Nokia.

    – They’re paying spiffs in order to get the carrier’s salespeople to push the brand.

    – They’re paying developers to develop Apps for the platform.

    – They’re paying for promotion.

    And how much do they make per license, per phone? 

    Microsoft is desperate and they are throwing money every which way in order to buy their way into the smart phone market but, so far, the results have been disappointing, to say the least.

    • simon

      Speaking of throwing money, I’m rather interested in the bottom line of XBox. Prior to the last quarter, XBox360 has been considered a significant success. However a long time ago, Microsoft threw billlions of dollars onto XBox to get it going. (for example 
      http://www.joystiq.com/2005/09/26/forbes-xbox-lost-microsoft-4-billion-and-counting/

      It’ll be hard to know exactly how much the XBox platform brought to Microsoft because there’s the factor of intangibles, especially the brand recognition, future potential expansion to other facets of media industry, etc. However I’ll be very interested in finding out what the bottom line of XBox is.

      Regardless, XBox is probably what’s giving Microsoft the courage to keep throwing money at mobile. However Apple and Google right now seem much tougher competition than Sony and Nintendo, and Microsoft doesn’t have to rely on others to make their XBox system unlike phones where they have to compete for the same OEMs and carriers as Google.

      • http://kaizenity.blogspot.com/ FalKirk

        “I’m rather interested in the bottom line of XBox”-simon

        Me too. I know that Microsoft went 5 billion in the hole before they started to make any money. I know that they’ve made a profit ever since, but I don’t know when or they went into the black. I recently read that they were still in the red but several commentators have told me – without support – that the Xbox is now profitable.

        I’d love to know the whole story. When, if ever, did the Xbox return to profitability and what is their real return on investment?

      • Tatil

        You can check MS Entertainment and Devices devision net income.  Last quarter that division had more than $200 million loss, but that includes the phone division and Skype now. (What makes Skype part of EnD, but not Online division?) due to a large drop in Xbox sales. If that holds up, Xbox 360 will not be making much money until the new version comes up. I don’t think Xbox is losing money now, so it is profitable, but I don’t think it made much money over the lifetime of the investment. It looks like roughly break even over the years, give or take a billion dollars and opportunity cost of the investment. 

      • Secular_Investor

        $5 billion that MS has invested in subsidising XBox is a drop in the ocean compared to what they are investing in trying to break into the mobile market. 

        So far, despite MS’s huge subsidies, Windows 7 has been a catastrophic failure, with global market share collapsing to a less than 2%. 

        MS may be betting the company on Windows 8, in which they will surely have to spend far more to subsidise. What must be worrying for MS is that the Metro GUI, similar in Windows 7 and 8, has clearly failed to attract consumers even with the large numerous types of subsidies that Falkirk previously pointed out. 

        I was amazed to discover that despite the hundreds of millions, possibly billions, of dollars which MS has tried to bribe developers to produce W 8 Apps, only 99 W 8 Apps are available, and of those 14 are produced by MS themselves. 

        That compares to more than 550,000 iPhone Apps and around 200,000 Apps for the iPad. This latter does not includes specialised enterprise Apps from almost every major independent consultant, systems integrator and the many thousands of in house Apps developed by the IT departments of almost all Fortune 500 companies, government departments around the world and most medium and small enterprises.

        http://www.forbes.com/sites/patrickmoorhead/2012/04/13/windows-8-store-with-99-metro-apps-is-it-behind-schedule/

        One of the common misconceptions is that MS’s huge legacy of Windows Apps can be simply ported across. This is not the case. Every one has to be carefully rewritten to work with Windows 8 Metro touchscreen GUI, which requires a huge investment by third party developers. As I say it, amazes me that so far under a 100 have so far done this.    This must be very worrying for MS.

      • http://kaizenity.blogspot.com/ FalKirk

        “This latter does not includes specialised enterprise Apps from almost every major independent consultant, systems integrator and the many thousands of in house Apps developed by the IT departments of almost all Fortune 500 companies, government departments around the world and most medium and small enterprises.” -Secular_Investor

        Yes, yes, yes! This is one of the points that I keep meaning to bring up but I keep forgetting to mention.

        We know that Windows won the PC war because they captured critical mass; captured the developers and starved the other operating systems to irrelevance. It is not the big name apps that cause the problem for competing platforms – they’re going to be ported eventually. It is the multitude of specialty Apps that cause platform lock-in. Companies are not going to want to spend the resources necessary to create company-only apps that run on more than one platform. Many are already on the iPhone/iPad bandwagon. They’re not going to hop off now.

        “One of the common misconceptions is that MS’s huge legacy of Windows Apps can be simply ported across.” -Secular_Investor

        Commentators may have this misconception but Microsoft doesn’t. I think that many of their design options – specifically the use of the touch-based Metro interface on their Notebooks and Desktops – is a desperate attempt to woo existing developers to their nascent tablet OS.

      • Secular_Investor

        “I think that many of their design options – specifically the use of the touch-based Metro interface on their Notebooks and Desktops – is a desperate attempt to woo existing developers to their nascent tablet OS.”

        I agree entirely. But MS have a huge, uphill task.

        Quite apart from their failure so far to bribe developers to produce Apps for WM 8, they have to swim against the current of the “Consumerisation of IT” and the wave of “BOYD” (Bring Your Own Device) which is overtaking IT departments, who are naturally inclined towards MS software but are being order by their superiors to serve the needs of Apple devices..

        Apple is surfing this wave and benefiting from the “halo effect”, with the iPhone overtaking and accelerating past Blackberries, gaining over 50% enterprise market share, and possibly as much as 90% market share with the iPad and a growing number of employees bringing in their own Macs – this being endorsed by Foresters whose survey showed that Apple users were the “Power users” 20% more efficient than Windows users!

      • http://kaizenity.blogspot.com/ FalKirk

        Microsoft is screwed. I think they are praying that there are a whole lot of IT types who are rooting for Windows to emerge as a true contender. And to be fair to Microsoft, I think there ARE a lot of IT types who are rooting for Microsoft.

        But times have changed. IT locked down computers because it made their jobs easier. We’re never going back to that. From the CEO at the top of the company to workers at the bottom, employees are demanding that IT make THEIR lives easier.

        After World War I they asked: “How are you going to keep them on the farm after they’ve seen gay Paree?” Today the question might be: How are you going to force them to switch to Windows 8 tablets when the best hardware, best software, and best ecosystem belongs to the iPad?” The answer? You ain’t.

      • Secular_Investor

        “IT locked down computers because it made their jobs easier.”

        Also, I think, because a lot in IT are scared for their jobs. It takes far more time to sort out MS problems than with Apple, which is one of the main reasons Foresters found that Apple users were 20% more productive.

      • aftoy

        Huge legacy of Windows apps yes, but what price are consumers willing to pay for those Windows apps if they are ported. I’m spoiled now with iOS because a lot of apps that I use are under $10. I also have been buying e-books for less than $10. MSFT’s and their developers big problem I suspect will be trying to justify $100 or more for Windows 8 apps. If AAPL had come out with a compelling Office suite for the iPad that would have hurt MSFT. Notice MSFT has the WinRT Office suite included free, wonder why?

      • Varunreg

        MS’s losses from XBox are probably a lot worse. The reason is they push a lot of XBox related expenses into their “Company wide expenses” category (the exact name eludes me at the moment). An example was this that the over $1Bn spent fixing the RRoD issue was not charged against the ES&D division, but rather the company wide division.

  • JohnDoey

    The comparison of initial iPhone unit sales and Lumia unit sales is meaningless. Selling 6 million original iPhones in 2007-2008 in US-only is like selling 60 million today, when consumers don’t need to be educated about what an iPhone is, or why they would need the Web or apps in their pocket. Further, the Lumia is the 7th generation Microsoft mobile platform and at least Nokia’s 7th smartphone, whereas the original iPhone was Apple’s very first smartphone and mobile OS.

    • Tatil

      They may not need to be educated on why they need web in their pockets, but they need to be “educated” on why they should switch to Windows Phone. Establishing a vibrant ecosystem from scratch takes time, too. 

    • Varunreg

      More importantly, the market is SO MUCH bigger now.

      The US market, for example, for touchscreen smartphones at the release of the iPhone was exactly 0% of the cellphone market. Now it is nearing 50% of the cellphone market.

  • Sacto_Joe

    So Microsoft is funding the world’s most expensive loss leader. It’s part of the price they’ve paid to get a “seat at the table”. They know that this game’s going to be playing for a long, long time. What’s intriguing to me is the huge amount of ignorance that still persists in understanding the nature of the game, both in terms of who the final players are going to be and their relative long term strengths.

    There is literally only one company that is guaranteed to be there when the dust finally settles, and that’s Apple. I’d say the chances are decent that Microsoft will also be a player, but we won’t know that until they roll their dice and the dice have a chance to “settle”. Google is a possibility, but their lack of a complete ecosystem will be a serious challenge. I see their purchase of Motorola as a big part of their attempt to make progress in that area. Finally, I can’t completely rule out HP, but they’ve muffed it big time.

    Everyone else is destined to be a subsidiary to this Final Configuration, barring something that comes along out of left field. It’ll be fascinating if the only two left standing then are the old rivals, Apple and Microsoft….

    • http://wmilliken.livejournal.com/ Walter Milliken

      I would add Amazon as a potential dark horse candidate, only because they’ve got the ecosystem and now experience with their own Android fork. They might have the best chance if they teamed up with, or bought out, one of the current Android players. They might also just go contract with HTC, Huawei, or ZTE. That should at least scare Google to death, and might kill Microsoft’s hopes as well.

      An Amazon/Microsoft teamup might be powerful, but I can’t quite see it happening — both would want to drive, I think. And that would add Nokia as a hardware partner, most likely. I suspect it would be a messy troika in that case.

      I’m also not sure how the carriers would react to Amazon; they want to sell, or charge extra for, content, and they know that’s not going to be in Amazon’s interests at all.

      • http://twitter.com/Marcos_El_Malo Marcos_El_Malo

        I agree. A Microsoft/Amazon team up seems about as possible as a mad scientist stitching together parts of their two CEOs to create . . . The Bezalmeros!

    • Secular_Investor

      I agree with Walter that Amazon has to be another dark horse.

      However, what astonished me is just how much Microsoft is investing in Nokia to try and gain a foothold in the smartphone market. 

      As Horace’s calcs show, to reach balance between upfront subsidies to Nokia  and licence receipts demands an astonishing ramp-up of Nokia sales!

      • Harry

        “I agree with Walter that Amazon has to be another dark horse.However, what astonished me is just how much Microsoft is investing in Nokia to try and gain a foothold in the smartphone market. ”
        It seems to me that MSFT is spending so much money to back their dark horse Nokia that it would have been cheaper to buy the horse outright. 
        Then they would have complete control of “Microkia” & not have to worry that an independent Nokia might make a business decision that adversely impact MSFT.

        Of course, they could still buy Nokia, at a much lower price than in 2010, or switch to Rimm also at a much lower price than in 2010, later.  

      • Secular_Investor

        Harry,

        The problem is that Nokia and RIMM are likely to prove to be bottomless money pits!

        Better they stick to software, but it looks like Mobile is going to cost them countless $  billions, but at least they don’t have to bear the loss on the hardware for every loss leader Windows phone!

        If Microsoft want to make some money out of mobile they should release an iPad version of Office before somebody steals their lunch!
         
        Office is their most profitable division after Windows, but they could lose the Office mobile market to somebody else producing Office compatible Apps at a fraction of the amount MS would charge for iPad Office.

        IMO MS are holding it back because people at the top of the MS  think it will help sell WM8.

        But I bet the MS Office division are tearing their hair out, well aware of the danger of competition overtaking them!

      • grs_dev

        Interesting observatin. The guy who runs Windows now is the guy who lead Microsoft in building their Office empire. I wonder if he knows something we don’t know…

      • http://www.asymco.com Horace Dediu

        Microsoft will not buy a licensee of their software because doing so would destroy the prospect of other licensees adopting their software.

    • grs_dev

      Just curious why do you feel Apple is “guaranteed” to be there when the dust settles?

  • macyourday

    Every company that dismissed the iPhone/pad has tanked or is about to. Google never dissed, just duplicated. MS initially trashed talked but has been quiet for a while. Does this suggest they will survive, or is their demise delayed by inertia and huge cash reserves?

    • Secular_Investor

      I’m not so sure that they have been quiet for a while. Only last year they and their sycophantic acolyte research outfits such as Gartner, IDC, iSupply etc. predicted that Windows Mobile sales would overtake iPhones!

      Instead of which Windows Mobile market share tanked to around 2%

    • gbonzo

      Apple is so collapsing right now. Google Insights shows that global iPhone interest is down year-on-year.

      This is not gonna be pretty. Tomorrow’s numbers might still be ok, but after that it looks really gloomy, unless they come up with anything competitive soon.

      • http://www.asymco.com Horace Dediu

        Not the Google Insights I’m using. http://www.google.com/insights/search/#q=iphone&cmpt=q

      • gbonzo

        Zoom in so that you see weekly scores (for example Feb11 – Apr12). Earlier today it showed one point down year-on-year. Now it shows the same score as one year ago.

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  • gadgety

    So what is the likelyhood of Windows Phone having faster growth rate than the iPhone had? None, unless they give them away for free in the BRIC quartet.