Wednesday, September 4, 2013

Microsoft's New Margins Strategy

There's nothing like buying a money-losing hardware vendor to improve margins at an over-the-hill software powerhouse.  Right?

In what may be Ballmer's latest best idea for Microsoft (his last best idea, retiring, worked like a charm), he's moving Microsoft from subsidizing its hardware partner's operations by $1B/year to paying money to accept all Nokia's losses.

Anyone care to guess how this turns out, in a world already well-occupied with successful incumbent vendors?  It's competing with Google, which is happy to give away its platform and is also selling hardware.  (See the Jaded Consumer article at Seeking Alpha, part One and part Two.)  Smartphones is a dog-eat-dog world, and Microsoft is charging into the teeth of high-volume vendors like Samsung with a product it must price to compete with feature phones … or actually sell feature phones.  But fear not.  It's not like Microsoft's never tried selling phones before.

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