Why Microsoft can give Windows Mobile away for free

Many pundits have asked why Microsoft persists with Windows Mobile, when they are only making about $300 million or less in license fees, chump change in a business which often reaches $60 billion in revenue.

The self-same pundits also predict the doom of Windows Mobile due to competition from other mobile operating systems such as Android or Symbian Foundation which are free.

This slide, from a Microsoft December 2008 internal presentation to Microsoft’s sales team, shows why Microsoft could easily afford to give Windows Mobile away for free and still make a profit on the venture.

Every connected Windows Mobile device on average earn Microsoft or its sales partners $385 in revenue, be it from sales of software or Hosted Exchange services. This is many multiples of the $8-15 a Windows Mobile license is supposed to cost, and means not only can Microsoft afford to subsidize Windows Mobile, they can not afford not to remain in the game, with potentially Billions in lost revenue if they pull out of the mobile market, as many suggest.

We know Microsoft is making a major about turn in its focus on Windows Mobile, much like in 1995 when they “got” the Internet or 2003 when they “got” security. With the smartphone market set to boom, Microsoft can not afford not to “get” mobile either, and from their internal communication it is clear they know very much the value of being a major player in the mobile market.