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Microsoft Allegedly Paying OEMs To Make Windows Phones

Microsoft may be throwing big money toward its smartphone hardware partners, and potential competitors, to use the Windows Phone operating system.

The figure of $2.6 billion was floated in a Twitter post this week, prompting a denial, of sorts, from Microsoft. The OEM subsidy estimate came from Russian wireless industry blogger Eldar Murtazin on Wednesday. He reported that Microsoft had several support payments going out this year to major manufacturers to produce at least one Windows Phone device each.

According to Murtazin's Tweet, the payments were $1.2 billion for Samsung, $500 million to Sony, $600 million to Huawei and $300 million to others -- for a total of $2.6 billion.

Top Microsoft spokesman Frank X. Shaw ridiculed Murtazin's unsourced report with a Tweet of his own that is a study in non-denial denial. Shaw wrote:

While Shaw is throwing cold water on the specific numbers, he sort of confirms the co-marketing. It's just as possible that the numbers are off on the low side as that they are off on the high side. It's even plausible that Shaw's Tweet is simply designed to sow doubt among the handset partners about how much Microsoft is paying each of them.

In any case, the suggested payments to OEMs potentially shines some light on Microsoft's Windows Phone strategy. Microsoft bought Nokia's device business in September, setting itself up to compete against its hardware partners in the smartphone market. At the time, Microsoft CEO Steve Ballmer suggested that he thought other device manufacturers would come out with more, rather than fewer, Windows Phones in the future.

That assertion had seemed delusional. Nokia was already producing between 80 percent and 90 percent of Windows Phones. With Microsoft buying Nokia, that figure seemed likely to run up to 100 percent. After all, who would want to compete with the Microsoft/Nokia integration on a platform that's struggled to get to the No. 3 position?

Murtazin's Tweet suggests a mechanism for bringing Ballmer's wish to fruition -- big payments to other device manufacturers. It would have been less delusional for Ballmer to think partners would develop devices for the Windows Phone platform if he knew Microsoft was going to be throwing a lot of money at them after the Nokia buy.

Meanwhile, Microsoft's devices bet gets even more entrenched as the CEO succession saga drags on.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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