Few days ago SeattlePI ran a story that Windows Phone revenue is less than $613 million which is labelled as “abysmal“. The story led many discussion on Windows Phoneâ€™s revenue potential, its effect at Microsoft,etc.
Let me try to clear what they are talking about. Windows Phones are part of the Entertainment and Devices division at Microsoft. E&D division generated $8.716 billion in revenue for the 2011 fiscal year and in that Xbox platform generated $8.103 billion. So the rest of the divisionâ€™s product including Windows Phone, Zune, Mediaroom, Surface and hardware generated $613 million. So they are making the point that Windows Phoneâ€™s revenue could be less than $613 million. Their number interpretation is correct, but the whole idea of the story is bad. My views on their story are:
1) Never compareÂ Microsoftâ€™s Windows Phone OS licensing revenue to Apple . Apple sells the hardware, software and the whole ecosystem. Both of their business models are different.
2) On comparing with Googleâ€™s Android they noted:
Google doesnâ€™t break out Android revenue. The mobile OS is free for phone manufacturers to adopt, and Google gets most of its Android revenue through advertising. In Googleâ€™s most recent quarterly earnings report, the word â€œAndroidâ€ appears just three times.
If a word only appears 3 times in earnings report, it clearly does not Â matter that much. How much is the revenue Google got from Android?Â Give me numbers! Even if you consider Microsoft generates $400 million more next year through Windows Phone revenue, its a $1 billion business. What about Google? $0.
3) Mobile OS has become an extension of our PC OS. Currently Windows Phones act as an end point of all Microsoft services, weaving their three screens + cloud strategy. Just look what Windows Phoneâ€™s by default comes with, Hotmail, SkyDrive, Windows Live, Messenger, Zune, Xbox, Office, Office 365 and SharePoint. For every Windows Phone Microsoft sells, all these services get a great benefit of native OS integration.
4) If you still think that all these services and OS licensing revenue donâ€™t matter, Microsoft, just like Google, can earn money directly from application and media sales and also from in-app advertising.
Not to mention that Google and its partners are spending/going to spend much more money in Android. Google may end up in paying $2-$6 billion damages to Oracle and its partners may end up paying about $60 for a patent licensed device !
In the end the story is indeed a non-story. Â Microsoft is not going to spin of Bing and they are not going to spin of Windows Phone, and its investors fully understand that it is a strategic area. Â Microsoft is also not going to go begging for money any time soon.
Like with most tech start-ups, at this early stage in the game for Windows Phone income hardly matters at all.