Microsoft's $US1b Smartphone Bet? That's Chump Change

Microsoft is rapidly developing Windows Phone 7, a smartphone platform to compete with iPhone, Android and BlackBerry. It's due later this year, 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 smartphone OS, Microsoft signaled 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 mobilisation 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 $US400 million on marketing alone this year. The total spent out of Microsoft's pocket could top $US1 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 $US62.5 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 dollar 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:

$US1.2 billion - the amount HP paid to acquire Palm, a fairly bustling phone maker with a promising operating system and phones already in the market.

$US1.5 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.

$US8 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.

$US13 billion - the amount Microsoft spent across all divisions on sales and marketing last year (R&D cost 'em $US8.7 billion).

$US15 billion - the amount of money that RIM, maker of the No.1 selling smartphone platform in the US, grossed worldwide during its fiscal 2010 selling BlackBerrys and pretty much nothing else (with profits of $US2.48 billion).

$US40 billion - a fair guess at the annual total revenue that smartphone sales will bring in this year, based on average prices and current sales projections from assorted analysts

$US250 billion - the amount of money carriers will take in from selling wireless data service alone - not counting test 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:

$US1 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 $US240 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.

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