Microsoft to Spend 'Billions' on Windows Phone 7?

Microsoft wants to convince the world that it is serious about making a successful entry into the already-crowded smartphone arena -- so serious that CEO Steve Ballmer is apparently planning to spend $400 million of Microsoft's budget just on marketing the forthcoming Windows Phone 7 devices at launch.

And that's not the half of it, according to Deutsche Bank telecommunications analyst Jonathan Goldberg.

Including ads and other promotions by wireless operators and handset makers, as well as the marketing activities of other partners around the world, the total expenditures for launching Windows Phone 7 could run into the "billions," Goldberg told InternetNews.com, relaying information that he said he heard recently from company executives.

"They're clearly going to spend lots of money," added Goldberg, who said he met with Windows Phone 7 executives in late July when he was attending Microsoft's annual Financial Analysts Meeting (FAM) on the company's Redmond, Wash. campus.

Goldberg said that he had heard rumors concerning the $400 million figure and asked the executives in person.

"They smiled, but said that if you add up what the whole ecosystem spends for the launch, it will be 'billions,' ... that is how they termed it to me," he said. Ultimately, he said the $400 million could be a number that Microsoft may have purposely leaked -- but he doesn't dispute that the figure is likely correct.

Microsoft plans to spend lavishly on a variety of fronts as it tries to establish its latest phone operating system, including paying phone manufacturers for engineering costs and subsidizing developers to make sure there are apps and games available for Windows Phone 7 handsets from the day of launch.

To many industry observers as well as investors and telecommunications buyers thinking about where to spend their own money, such massive spending might seem to be a sheer desperation play. Not so, said Goldberg.

"The market is still wide open," he said, adding that he sees nothing wrong with Microsoft spending a lot of money to establish itself as a major mobile player amid intense competition from Apple's iPhone and Google's growing menu of Android devices.

"Android is doing very well, but it's vulnerable and if Android stumbled, [Microsoft] could pick it up," Goldberg added.

He also doesn't see a problem with Microsoft subsidizing developers to write apps for the phones, at least not at first.

"They're seeding the market so that their app store isn't empty on day one, which is fair," he said. "But if six months from now they're still subsidizing apps then that's not a good sign."

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals. Follow him on Twitter @stuartj1000.


Microsoft, mobile, advertising, Windows Mobile, Windows Phone 7