Microsoft to spend over $500m to catch up to iPhone, Android

Posted:
in iPhone edited January 2014
Marketing costs for Microsoft's Windows Phone 7 launch will add up to more than half a billion dollars as it re-enters the smartphone market, a new report claims.



According to Kim-Mai Cutler, in a guest post on TechCrunch, Microsoft is prepared to make up for lost time in the smartphone market with an expensive marketing push.



Jonathan Goldberg, an analyst at Deutsche Bank, estimated that the Redmond, Wa., company will spend at least $400 million on marketing the Windows Phone 7 launch, which should come before the end of the year. In addition to marketing costs, Microsoft has already agreed to subsidize handset manufacturers' "non-recurring engineering" costs.



?This is make-or-break for them. They need to do whatever it takes to stay in the game,? said Goldberg.



Microsoft executives told Goldberg during a recent visit to company headquarters that the company, carriers, and manufacturing partners, would spend "billions" of dollars in the first year on marketing and development of Windows Phone 7. Another source estimated a $1 billion price tag for the launch, with half of it going to marketing.



$500 million is roughly the equivalent of Apple's entire advertising budget for its 2009 fiscal year. In its 2009 Form 10-K filing to the SEC, the Cupertino, Calif., company listed $501 million in advertising expenses. Microsoft's fiscal 2009 advertising budget was $1.4 billion.



According to the report, Microsoft, in order to attract third-party developers to its platform, is offering revenue guarantees and other financial support. The company will have an uphill battle against Apple and Google, which already have well-established ecosystems for third-party applications.



At Apple's annual developer conference in June, CEO Steve Jobs announced that over 5 billion apps had been downloaded from its App Store in just 2 years, earning over $1 billion in revenue for developers.



Microsoft remains undaunted. Greg Sullivan, senior product manager at Microsoft, says the company is taking a "long-term view" of the market, since "it's still in the early stages." Anand Iyer, also a senior product manager, asserts that there is strong interest in Windows Phone 7, noting that downloads of the company's development tools have exceeded 300,000.



In July, Microsoft pulled its KIN line of youth-oriented phones after just 48 days on the market. In an official statement, the company outlined its plan to "focus on [its] Windows Phone 7 launch." The KIN team was folded into the Windows Phone 7 team.



During a ReMIX Microsoft conference in France, the company referred to IDC data to estimate total sales of 30 million Windows Phone 7 devices by the end of 2011. In comparison, Jobs set a goal of 10 million iPhones sold in 2008, the first full calendar year of availability for the smartphone.
«13456710

Comments

  • sheffsheff Posts: 1,407member
    Let's see who Microsoft will copy this time: a tight control over the ecosystem Apple style, or a mish mash of whatever happens hardware and software wise of Google. So far it looks like a hybrid of different hardware manufacturers with dictated microsoft standards and a fairly controlled eco-system, but we'll see what happens after launch.



    I'm sure Ballmer (if he is still around) will have a lot of sleepless nights trying to figure out how to set up the copiers.



    PS I am just not exited at all about Phone 7. Not that it's bad, it's just I don't care what they put out, and after the flop of KIN they better nail this launch or they are history in the phone business. This time I truly believe that.
  • doyourownthingdoyourownthing Posts: 371member
    i expect another kin congrats microsoft...i guess 500M will buy a lot of xerox machines
  • normangnormang Posts: 27member
    Wow, Half billion dollars right down the drain.
  • nasseraenasserae Posts: 3,144member
    Quote:

    Microsoft executives told Goldberg during a recent visit to company headquarters that the company, carriers, and manufacturing partners, would spend "billions" of dollars in the first year on marketing and development of Windows Phone 7. Another source estimated a $1 billion price tag for the launch, with half of it going to marketing.



    Big waste of money.
  • sheffsheff Posts: 1,407member
    Quote:
    Originally Posted by NasserAE View Post


    Big waste of money.



  • nasseraenasserae Posts: 3,144member
    Quote:
    Originally Posted by sheff View Post






    This what happens when the CEO of the company is a salesman. He thinks everything can be solved by dumping money into marketing.
  • suddenly newtonsuddenly newton Posts: 13,092member
    Microsoft Windows Phone 7 launchgate!

    It's not AI without it!
  • jkichlinejkichline Posts: 1,002member
    I don't think it will work for them. You can advertise your way into this space, you need to innovate your way in. While I don't think they will right out flop, I do think it's a bad investment. As a developer though, I'd rather support MS Phone 7 than Android because I know the tools will be great. I'm not sure they can beat Apples SDK, but they sure can out do Android.
  • rtm135rtm135 Posts: 310member
    As an iPhone owner, I'm looking forward to WP7 because it's the first real competition to Apple's dominance. It's interesting how pro-Apple mags like Engadget and Gizmodo are stoked about what M$ is bringing to the table. After running the demo, I have to admit that Apple's GUI seemed kind of dated.
  • finetunesfinetunes Posts: 2,065member
    Maybe the money would be better spent building a school in Los Angeles:



    http://theweek.com/article/index/206...by-the-numbers

  • tundraboytundraboy Posts: 1,440member
    Quote:
    Originally Posted by AppleInsider View Post


    Greg Sullivan, senior product manager at Microsoft, says the company is taking a "long-term view" of the market . . .



    This is the cue for MSFT stockholders to dump their holdings and run for the hills. What Microsoft is telling you is that right next to the bottomless pits labeled "XBox" and "Longhorn/Vista", they have a dug a fresh new hole named "Windows Phone 7" and they will (again) be dumping billions upon billions of stockholders' money into it for the next few years.
  • mj webmj web Posts: 872member
    It's simply that simple.
  • alfiejralfiejr Posts: 1,524member
    half a billion already down the drain with the Kin. now he doubles down on WP 7. if it's not a real hit, he's screwed the pooch.
  • _rick_v__rick_v_ Posts: 129member
    Microsoft is attempting to buy their way into the market... again. Just like they did with the XBox.
  • daniel001daniel001 Posts: 56member
    WTF are "non-recurring engineering" costs, someone?
  • firefishfirefish Posts: 8member
    Microsoft - this is Reality speaking.



    Here's a word of wisdom - save your money and suck this one up as a loss.



    Start planning the next big thing that will bring you to triumph.



    Accept the fact that Apple got you & that you'll never make a better iPhone, mainly because they invented the iPhone and that's what people love, not the cell phone. They love the 'iPhone', which is a category of it's own.



    I hope you make the smart strategical move. Otherwise, let me know now so I can sell off whatever is left of my Microsoft shares. \
  • mesomorphicmanmesomorphicman Posts: 549member
    Ahhh... gotta love the Microsoft way of thinking, throw hundreds of millions if not billions of dollars at the problem then get on your knees and pray it works. Who needs innovation when you have such deep pockets?



    They waited too long, iPhone and Android are too deep entrenched and whoever doesn't have one of those has a Blackberry. I foresee worse than Blackberry Torch type sales for WinMo7 phones.
  • tnsftnsf Posts: 202member
    The fact that MSFT needs to spend upwards of $500 million is a symptom of a big big problem, not an indicator of enthusiasm or lofty goals.



    Apple is one company doing software, hardware and sales & marketing. Google on the other hand has anywhere from 5 to 10 OEMs doing software, hardware and sales & marketing. MSFT will be no different.



    Still, who makes the most money of them all? Apple. All by itself.



    Why don't investors in MSFT and Google question the effectiveness of their business model in delivering competitive ROI?



    Google claims to be activating 160,000 devices each day, while Apple is somewhere around 120,000.



    Apple, 1 company, 2 handsets, 120,000 units per day

    Google, 10 OEMs, 50 handsets, 160,000 units per day



    I'm sorry, but this is not a success story for Google and its investors, this is a failure. Their business model is incredibly inefficient. There are so many redundant expenditures amongst Google and all its OEMs who then have to divy up collective revenues and profits that are less than Apple earns all by themselves.



    Now, MSFT is embarking on the exact same business model that allowed them to be leapfrogged by the rest of the industry. Why don't investors question how the company plans to acheive a different outcome by doing the same thing again?



    I say stop the insanity. If MSFT wants to spend billions on getting back into the phone market then spend 25 billion and buy HTC. Make it a WM7 shop and boom: instant hardware, instant distribution and it wipes out the best Google hardware vendor.



    If mobile is the future of MSFT then 25 billion is worth it (if spent correctly).
  • nvidia2008nvidia2008 Posts: 9,262member
    Quote:
    Originally Posted by FireFish View Post


    Microsoft - this is Reality speaking.



    Here's a word of wisdom - save your money and suck this one up as a loss.



    Start planning the next big thing that will bring you to triumph.



    Accept the fact that Apple got you & that you'll never make a better iPhone, mainly because they invented the iPhone and that's what people love, not the cell phone. They love the 'iPhone', which is a category of it's own.



    I hope you make the smart strategical move. Otherwise, let me know now so I can sell off whatever is left of my Microsoft shares. \




    Problem is, there is no next big thing. Unless you're talking about Office 2012 or Windows 8 or Xbox720. They're totally out of ideas, clueless, and desperate to be seen as relevant in the mobile space.
  • mxyzptlkmxyzptlk Posts: 3member
    Quote:
    Originally Posted by Daniel001 View Post


    WTF are "non-recurring engineering" costs, someone?



    Just a guess; it might mean they will eat the cost of R&D, design, and initial implementation (both hardware and software) of the device and establish its cost basis primarily on parts/manufacturing plus some markup...whereas with Apple the devices are expected to pay for these things (amortized over the market lifetime of the product of course).
Sign In or Register to comment.