Microsoft's $1 Billion Smart Phone Bet? That's Chump Change

Illustration for article titled Microsoft's $1 Billion Smart Phone Bet? That's Chump Change

Microsoft is rapidly developing Windows Phone 7, a smart phone platform to compete with iPhone, Android and BlackBerry. It's due this fall, though we don't yet know the dates, prices and carriers. We do know one thing, the launch will be massive. Like billion-dollar massive.


To be sure, Microsoft isn't starting from a comfortable position here. By killing off its earlier smart phone OS, Microsoft signalled that it's willing to fight to the death (in this market). And it's starting the fight on its back. So, how much is this insane mobilization going to cost the one-time alleged monopolist? A billion? More?

TechCrunch cites Deutsche Bank telecom analyst Jonathan Goldberg, saying that the company will spend $400 million on marketing alone this year. The total spent out of Microsoft's pocket could top $1 billion including development. Goldberg is quoted saying that he was told that between Microsoft and its carrier and hardware partners, "billions" would be spent. In the first year.

Super-keen Microsoft watcher Mary Jo Foley says a billion "would be a small price to pay" for Microsoft to get back in the game, citing its $62.5 billion 2010 revenues and its increasingly noticeable "lack of a credible and coherent answer to the iPhone and Android."

( is a joint venture of Microsoft and NBC Universal, but nobody is telling us how much the company is spending on its Windows Phone 7 launch.)

So, what does a billion dollars mean in the wireless world? A few years ago, it might have been significant, but now, it's just pennies in a very large pig. Here are some numbers to put it in perspective:

$1.2 billion - the amount HP paid to acquire Palm, a fairly bustling phone maker with a promising operating system and phones already in the market


$1.5 billion - a conservative estimate of how much Apple made selling the 8.4 million iPhones it reported selling from April through June of this year

$8 billion - the approximate amount raked in by the sale of 61.6 million smartphones worldwide in that same quarter, just a three month period, as tracked by Gartner


$13 billion - the amount Microsoft spent across all divisions on sales and marketing last year (R&D cost 'em $8.7 billion)

$15 billion - the amount of money that RIM, maker of the No. 1 selling smart phone platform in the U.S., grossed worldwide during its fiscal 2010 selling BlackBerrys and pretty much nothing else (with profits of $2.48 billion)


$40 billion - a fair guess at the annual total revenue that smart phone sales will bring in this year, based on average prices and current sales projections from assorted analysts

$250 billion - the amount of money carriers will take in from selling wireless data service alone - not counting text messages! - by 2014, according to iSuppli (Hint: this is why carriers will help sell these phones, with subsidies, revenue sharing or any other back-room deal that gets worked out)


Almost forgot one figure:

$1 billion - a very conservative guess at how much money Microsoft lost by developing and then killing off the Kin not-so-smart phone, according to Foley, including a $240 million write-off when the project was killed


So yeah, a billion dollars, Microsoft? Just a billion? I'm no accountant, but if you want to get back into this business, you're going to have to spend till it hurts. A billion is what we'll politely call "a good start."

Wilson Rothman, former Gizmodo features editor, is now deputy Technology & Science editor at You may miss him around these parts, but you can always catch up with him on Twitter at @wjrothman.

Illustration by Sam Spratt. Check out Sam's portfolio and become a fan of his Facebook Artist's Page.




Insert Dr. Evil reference here... It is crazy to think that a billion dollars isn't really all that much in this game, I mean I dunno, that's just a trip. Although I would be curious to see what other makers spend on advertising, I understand Apple made more than that in 3 months on iPhones, but what are they spending to advertise the iPhone a year... Microsoft should probably triple or quadruple whatever that amount is, and they'll be in good shape. Android would be tough to pin down since all the carriers, and phone makers advertise independently of one another. What does RIM spend on an advertising?

Alright I googled it myself... here's the answer:

Apple spent half a billion last year on advertising total, so all products, $501 million dollars or 1.37% of revenue... pennies.

RIM spent $337 million last year on advertising, which was 3.60% of revenue.


(Microsoft spent way more than that last year in advertising, but again... it wasn't just for phones, and they have Xbox on top of software, video games are advertised like crazy)