When Microsoft showcased its latest smartphone operating system in Barcelona, Spain, on Monday with innovative features and a new name, CEO Steve Ballmer noted that one thing that won’t be updated is its business model. That means original equipment manufacturers who want to feature Windows Phone 7 Series will still pay a fee for each device, estimated in the past by Strategic Analytics at between $8 and $15 per phone.
“I think there’s something clean and simple and easy to understand about our model,” Ballmer was quoted as saying. “We build something, we sell that thing … I think it’s not only in our best interests, but it’s a simple model that’s easy for developers, handset manufacturers, and our operator partners to deal with, to understand, and to build from.”
One published estimate put Microsoft’s potential income from the smartphone licensing at $300 million.
Ballmer’s comments spawned a debate among tech writers about whether the software giant, which is already losing market share to Research In Motion and Apple, should change its practices. Google’s growing Android mobile platform is available free to OEMs, while Apple and RIM make their own operating systems for their fast-selling smartphones.
If it gave away Windows Phone 7 Series, Microsoft could still profit by selling applications, mobile subscriptions to Xbox Live and Zune, and advertising, or following Google’s example and selling its own hardware, critics have suggested.
“I think it comes down to creating value,” said Kirk Parsons, senior telecommunications analyst at J.D. Power and Associates. “The fact that Microsoft’s OS system offers built-in applications like Office — featuring Word, Excel and PowerPoint — increases the value proposition to OEMs and carriers. Whether that model will be sustainable in the long term remains to be seen.”
Parsons said the model of free software platforms such as Android is…