Microsoft Confirms It Gets Less Than $10 Per Nokia Windows Phone Sold
We all know that Microsoft isn’t selling nearly as many Windows Phones as it would like to.
Now we also know that it isn’t getting much revenue for each phone, either. As part of its “rationale for the deal,” Microsoft disclosed that, under its current Nokia deal, it gets less than $10 per phone in software royalties. That means that even if Windows Phone were eventually a big deal, it might not translate into big bucks for Microsoft under the current structure.
So, while taking a big risk in buying Nokia’s phone business, Microsoft argues that it stands to reap greater rewards if it is successful. The company points out that Nokia’s Windows Phones have gross profit margins in the range of $40 per phone.
In addition, Microsoft has also been paying a small fortune to Nokia in “platform support” payments — essentially, cash that Microsoft used to convince Nokia to bet on Windows Phone over Android.
Of course, there is a lot more to the economics, and making the hardware means all kinds of other costs and risks, including inventory, channel management, carrier relationships, regulatory testing, and lots of other things not required when one is simply in the operating-system business.
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