$250 million for a long term hardware partner is not much compared with the $12.5 billion Google is spending to acquire Motorola Mobiity in order to have one...and Google doesn't even get royalties back to cover part of the costs.
Indeed, considering the very real possibility of patent licensing fees, Microsoft may even get a slice of every hand set Google sells.
On the other hand, considering that Nokia is and will continue to feature Windows Phone in their advertising, Microsoft is likely to further benefit from the expenditure.
Motorola had $3.2 Billion in cash, and its losses act as tax deductions for Google (8yrs * $700 million = ~$5.6 Billion, from the article). 12.5 - 3.2 - 5.6 = $3.7 Billion.
The amount of unused tax benefits MM has is $1.7 billion according to the article - the $700 million a year figure is speculation by an analyst.
Furthermore, future tax benefits ought to be discounted to a current value and the potential rate of return for alternative investments for Google's cash must be considered.
Not to mention that Microsoft's $250 million also affects their taxes.
It's such a huge amount of money. Patents are what they officially say. Obviously, they have partners and they don't want to lose them in the short term, so protecting them seems pretty harmless. But they will inevitably compete at some point in the future. That seems to be one of the reasons behind the "patent story".
The other two might be that they are making so much less money on every device they sell than Apple. It could possibly become a reasonable source of revenue (Google almost always talks about market share of Android, not the revenue).
The last thought, is the big picture of utilizing the emergence of tablets to become a predominant player in the industry. Beyond search. And somehow surpass Microsoft and Windows as the omnipresent platform. That seems really tough.
No I believe the hardware side of the mobile division is included. But that was just a bonus (or a curse?) for Google who, as you said, just really wanted the patent.
I'm not so sure anymore that was Google's only intent. Google may be later be forced to become an OEM. As of today, it's quite a reality that Samsung (who sells 55% of all Android smartphones), Amazon, Facebook and Baidu won't completely fork Android in their own best interest. It may behoove Google to develop a Nexus line that covers a wide range of prices.
It is not clear if they expect the platform support pyments to be larger or smaller than the software royalty agreement, ie whether they are paying Microsoft in the long run or vice versa. I guess it may depend on sales to some extent, although it ways there is also a minimum royalty.
Eventually yes I guess, but I think it might be a while before Nokia end up paying Microsoft (in net terms anyway). Microsoft are probably more interested in gaining market share at this point, so I wouldn't be surprised if there's more money flowing Nokia's way in the coming quarters.
If Microsoft pays Nokia a fixed amount for using the OS on a certain number of models while Nokia pays Microsoft a variable amount proportional to phones sold, it's very easy to see Nokia's best possible scenario is to sell just enough phones to cover the production costs while keeping as much of Microsoft's money as possible. RIght now, the odds of outselling Android and iPhones are very slim.
Considering sales volume, I'd say Nokia is right on target. Elop may prove himself a genius, after all.
If selling phones is profitable, then the best scenario is to sell as many phones as possible, regardless of Microsoft's money. Once they sell more than enough phones to offset Microsoft's money, it means their profit per phone goes up, so "selling just enough phones to cover the production costs" doesn't really make sense.
Long term, the odds of WP7 outselling both are better than slim because Microsoft was thinking about the low end market when they designed WP7.
There are two standard screen sizes, 800 x 480 and 400 x 480 which is well suited for cheaper commodity devices.
Nokia sold 93 million commodity devices last quarter (that's about half the number of iPhones ever sold). The market is huge and neither Android or iOS is likely to go there.
Android won't because the development costs of adapting the OS to small low margin commodity devices would be borne by the manufacturers and carriers, and iOS won't because of Apple's branding strategy.
Nokia recognized that its core competency was manufacturing and hardware design, not user interfaces and software development. Considering that they were probably better at both than any other handset manufacturer, it is probable that other handset manufacturers will follow course, should Nokia see even moderate success with their strategy.
[edit] Nokia has sold 1.5 billion S40 devices. WP7 is what will replace them.
Android is already on the low end commodity devices. And those manufacturers and carriers (i.e. prepay or non-US) don't seem that fussed about adapting Android, they just use stock. So it's only really the chip suppliers who need to get Android working.
MediaTek, who Elop cited as eating Nokia's low-end market by suppling chips to no-name brands in his "burning platform" memo also have been working on Android for a while and have partnered with Google to make GoogleTV (i.e. Android) chipsets too.
Yes, attaching a retracting security connector to a removable battery cover wasn't a particularly smart move.
I also noticed the Nokia knock-offs in the background. Though I'm not sure if any of the phones are built by the chip maker themselves as ODM samples or if they're provided by customers who've bought their chips.
There's another video here with a better look at the Nokia-alikes as well as the tablets they're powering and it's more obvious that they've gathered together products from a range of low end brands that they've sold chips to.
> There are two standard screen sizes, 800 x 480 and 400 x 480 which is well suited for cheaper commodity devices.
There are Android devices being sold with 200x320 screens. To say nothing about Nokia's huge sales of S40 devices.
> Android won't because the development costs of adapting the OS to small low margin commodity devices would be borne by the manufacturers and carriers,
The closer you are to the upstream manufacturer's (the company you buy chips from) reference design, the lower your costs. I can't imagine companies that cater to the lowest-end of the market trying to differentiate on technology.
> WP7 is what will replace them.
There are a lot of if's in this idea. It could happen IF Microsoft could make WP7 attractive on low-end devices (big if #1) AND Android manufacturers fail to make Android run on them (big if #2) AND Nokia decides they will replace S40 with WP7 (big if #3). Samsung will merge Bada into Tizen (a.k.a. Meego) and pursue the low-end segment with it. WP7 will only be a contender for the low end if Samsung starts to fail in a market they know very well (big if #4).
When you see Microsoft paying money to Nokia so that they boost WP7 market share you have to imagine they already failed to convince more viable companies to do it. I have little doubt Microsoft offered similar deals to Samsung, LG, HTC and others and Nokia was simply the cheapest one. Or the only one who took it.
>"When you see Microsoft paying money to Nokia so that they boost WP7 market share you have to imagine they already failed to convince more viable companies to do it."
Well Microsoft's strategy with the "more viable companies" appears to be receiving a check every time those companies - HTC, Samsung, LG - ship an Android phone (Now at 70% of Android phones in the US market).
Over the long term, I would not be surprised to see those companies switch to WP7 given that they are already paying Microsoft for the OS on their phones.
Look at it this way, Microsoft already has agreements with those companies, and therefore, those companies have a much better chance of influencing the future direction of WP7 than they do of Android - Google is not partnering with anyone except Motorola Mobility which they should soon own.
> Over the long term, I would not be surprised to see those companies switch to WP7 given that they are already paying Microsoft for the OS on their phones.
Except for the fact Android phones outsell WP7 ones 40 to 1
The smartphone market is worth much more than a measly $250M/quarter. Nokia would want to sell any and all smartphones it can, not just enough to cover production costs. That would be suicide. Your best possible scenario is actually the worst possible scenario for Nokia.
> it's very easy to see Nokia's best possible scenario is to sell just enough phones to cover the production costs while keeping as much of Microsoft's money as possible.
I can't really think of a dumber strategy than this.
Probably, given that Microsoft has never made money on Windows Mobile -- minuscule licensing costs coupled with a high engineering price. In their brightest expectations I don't think they see themselves making money with it.
Microsoft's mobile efforts have always been about the ecosystem. Office, Exchange, Windows security technologies, and now the xbox platform (though I still marvel that having your xbox achievements available for perusal was thought to be a big feature of WP7). Given that approach, Android can serve that purpose even without royalties.
>In their brightest expectations I don't think they see themselves making money with it.
If MS defeated Android there is no question that they would raise the price of the licensing fee. Since they won't MS is faced with the reality that, while they are making money now, these patents won't last forever.
Don't see how a measly (relatively speaking for these giant companies) $250M should have been a major factor for Nokia to choose to focus on Windows Phones rather than Android.
Apple and Google are dominating the smartphone OS market and I don't see how two slow-moving companies will make a serious dent in the consumer market. How many people wold would give up their iPhone for a Windows phone, especially as an early adopter? I'd be very surprised if any Windows Phone gains serious traction with consumers.
The best shot I see for Windows Phone success would be in the enterprise market where easy/free compatibility with MS Office products and other MS products used at work could be a large benefit. But Apple is making headway here as well so it could all be for naught.
Microsoft is gigantic, rich and relentless, they do not give up. Look at the amounts of cash they've been burning on Bing for years patiently waiting for their opening. You should not never count them out.
You make it sound like its inevitable that Bing will be a huge success just because Microsoft can burn money. Its has made inroads, but my guess is that it has reached its peak.
I'm not counting on Microsoft giving up on its products - I just see them as patiently burning through cash (generated from its successful cash cows) without making a significant splash in mobile. Just because they can afford to throw away money doesn't mean that they'll be successful at all of their new ventures.
This isn't exclusively a Microsoft thing either. Look at Google and its multiple attempts at new products (Wave, Buzz, Google+). They can obviously afford it because of their own cash cow, search.
I DO think that it is inevitable that Microsoft won't become a threat so I stated my opinion and gave my reasons for it. Your reason that I shouldn't count them out was solely because they have cash to burn and have shown a past willingness to burn it. My reply to you is that such willingness does not mean that they will ever contend in this market.
I ended up getting the Samsung Focus S. I was convinced I was switching to Android and going to get the Galaxy Nexus after owning every iPhone since the 3G. However, after looking at several different phones I found the Mango UI to be the most innovative take on interfaces. I actually feel that as far as the core interface goes both Mango and Android have pulled far ahead of iOS.
Back in 1997, Microsoft invested $150m in Apple along with a release of Office for the Mac. That worked out pretty well. Now after a bit of inflation, it's $250m and a release of Windows Phone.
If not snark, I must disagree. It was a very poor competitive investment which is only justifiable if the gov "cornered" MS into making it over anti-trust.
Quite simply, no. Without Apple, Microsoft would have an unquestionable monopoly over personal computer operating systems it was (and is) actively leveraging to gain competitive advantages in application software. That would create lots of restrictions Microsoft wasn't comfortable with.
The best scenario would be a niche-player Apple. In personal computers, it still is, but the "post-PC" products it introduced have a good potential of turning Microsoft into a niche-player as PCs go the way of the dodo.
That would create lots of restrictions Microsoft wasn't comfortable with
The most likely scenario was that Microsoft would have been broken up, which while it was unwanted by Gates would have likely led to a much more valuable set of combined parts today. Microsoft was the #1 software engineering powerhouse, but they always managed to sabotage their own efforts (force integration where it was detrimental, alignment to a core strategy that often meant that they saw themselves as their biggest competitor, etc).
If Microsoft didn't help Apple, and Apple hypothetically disappeared, today we would likely have a lot more mini-Microsofts in our lives.
Not necessarily. Keeping 95% of the world irrevocably hooked on MS Office would have been an equally good (if not better) outcome. The OS market is irrelevant if you've got the one software package everyone in the business world needs.
IIRC that's not true. Office for Mac has always been a pretty big cash cow for Microsoft, even if it doesn't seem like it should be. It also helps keep the Office-or-die ecosystem in businesses intact.
Making more money from Office is winning a battle while losing the war. If Microsoft didn't infuse cash, Apple could have potentially died. Microsoft's biggest competitor--one who's Mac division made more revenue than Windows--may not exist at all or no where close to as strong as it is today.
This is completely un-analogous. It would be similar if Microsoft paid Apple $150 million to cease OS development and differentiate themselves merely as a Windows PC builder (which would have made iOS and thus the iPhone and iPad completely impossible). Unless you own the platform, you are selling commodities.
Of course, Symbian was probably headed for the same marketshare hit that RIM (and previously successful Android builders like HTC) experienced this year, so I'm not criticizing the partnership.
The real news is that Nokia sold over a million Lumia phones over 2 months of launch in Europe and is launching the Lumia 900 in March on AT&T for $99 on contract.
Nope, when someone states an activation number than its believable..the number is far less than 1 million..in fact some are classifying it as only 300,000 sold.
Speaking of speculation, you have ZERO backing for your conjectures about why posts from Winsupersite get buried or simply don't make the front page. Furthermore, insulting your fellow users by calling them "fanboys" is not in the best traditions of Hacker News.
Update: The problem here is that we have anonymous/opaque voting, moderation, and flagging. Without showing me a collection of stories that received massive upvotes but never made the front page, we have no evidence of moderation or flagging, just evidence that your interests are in the minority.
If we did have such evidence, all we could say is that moderators had decided that such articles do not belong here, or that users felt they did not belong here, but we can't distinguish between the cases. Without being able to establish that there are users who consistently flag such articles, you have no argument.
If we did have some way of identifying which users were flagging such articles, how would you propose to back up a claim that they are "fanboys?" Do you have a definition for this term other than "Disagree with you?"
Without a lot more evidence, I simply can't take your speculative aside as more than a broadly aimed piece of abuse directed at people who don't share your enthusiasms.
>Speaking of speculation, you have ZERO backing for your conjectures about why posts from Winsupersite get buried or simply don't make the front page
Try submitting a story from Winsupersite, it will be instantly dead. That either means it was heavily flagged in the past that the system auto-kills any submission from it, or it was singled out by a moderator.
>Update: The problem here is that we have anonymous/opaque voting, moderation, and flagging. Without showing me a collection of stories that received massive upvotes but never made the front page, we have no evidence of moderation or flagging, just evidence that your interests are in the minority.
Eg. see this post complaining but no action was taken.
I am not even complaining that the stories are not voted up, it is that they're completely banned. If it was Daring Fireball(Winsupersite is basically the Microsoft equivalent of that) that was banned, HN would go completely ballistic.
Not to mention that fact that Gruber's deprecating and sometimes misinformed takes on important Microsoft announcements get more traction here than the actual news itself.
Do you really see anything on that site which makes any submission to it instantly dead other than that it's Microsoft-centric reporting which seems to be its only sin?
Comparing Daring Fireball to Winsupersite is interesting. Every time a DF article is posted, there are many, many comments that are negative about Gruber. So clearly, it is posible for an author and site to beintensely disliked by a sizeable portion of HN readers but not get banned.
As you said, it is possible that stories in the past were flagged. And? Does that etablish that the stories flagged in the past were flagged by so-called fanboys? No, only that stories in the past were flagged.
Likewise, you say yourself that moderators may be killing the stories by hand. How is this evidence of so-called fanboys?
There are other possibilities: The HN software may have detected voting rings. What if a bunch of people were submitting stories and voting them onto the front page? Maybe the fanboys were actually pro-Winsupersite!!!
Again, we just don't know, and these arguments seem to come down to "People are flagging/banning stuff I like, so there must be fanboys at work, because any rational person would agree with my views."
Friend, many of my own posts get flagged or banned and I don't take it personally or think of the flaggers in opproprious terms. Shrug this one off. We don't know the whole story, why construct explanations for what we observe in a negative light?
"just evidence that your interests are in the minority."
This evidence restated means that HN is not a Microsoft friendly place. OP just termed it as fanboys But I would rather call it Microsoft haters or Microsoft ignorants at least. Given that Microsoft is still a big enough name in the world of computing, this hate/ignorance can only be attributed to being fanboys/girls of other platforms/corporations.
> Given that Microsoft is still a big enough name in the world of computing, this hate/ignorance can only be attributed to being fanboys/girls of other platforms/corporations.
That's a ridiculous claim. The only way that anyone could hate Microsoft is if they are a fanboy for a Microsoft competitor?
I'll never buy a car from GM. Does that mean I must be a fanboy for Ford, or Toyota, or some other car company?
Sometimes people have a bad experience (or bad experiences) with a company. And sometimes people just don't happen to like the same things as you.
It's not the AT&T angle that I was commenting on, but the $99. (Although I'm not sure about the date, either.) Anything reported as coming from "a portion of AT&T’s 2012 roadmap from a trusted source" is pretty much speculation, because even if the information is legitimate, it could easily change up until the moment it's made public.
Indeed, considering the very real possibility of patent licensing fees, Microsoft may even get a slice of every hand set Google sells.
On the other hand, considering that Nokia is and will continue to feature Windows Phone in their advertising, Microsoft is likely to further benefit from the expenditure.