Microsoft may be taking a page from Google's Android. The software giant reportedly is licensing its Windows Phone
operating system for free to two phone makers in India.
According to a story in Thursday's Times of India, the company is waiving the license fee for "at least two Indian phone makers." Plans to release Windows Phone devices in India by those phone manufacturers, Lava and Karbonn, were announced at the Mobile World Congress last month, although no mention had been made of the free licensing.
Google's Android, which is by far the dominant mobile operating system worldwide, is provided to phone makers for free. Both Lava and Karbonn also offer Android phones.
The Times said Microsoft had been in talks with Indian phone makers since last year, but the talks were stalled until the license fee was waived. The fee historically reportedly ranges from $20 to $30 per phone. Windows Phone devices make up less than 10 percent of the smartphone market in India, and developing countries represent a big growth area for the devices.
This appears to be the first time Microsoft has waived the fee. In fact, it even charged Nokia from $20 to $30 for each Lumia phone when Nokia agreed to use Windows Phone exclusively two years ago.
Microsoft has declined to comment on the report.
Ramon Llamas, an analyst with industry research firm IDC, told us that the fee waiving "is a smart move to gain traction with some key vendors in key markets" that the company needs for growth, like India. He said this was "beyond testing the waters."
He added that a big question is "how will this play out with other vendors elsewhere." If two Indian phone makers could hold out adopting Windows Phone until they got a free license, why wouldn't other makers?
$2 Billion from Android
And then there's Nokia. Llamas asked "how does this align with the Nokia X?" The X line of low-cost Android phones is intended to help that phone maker, soon to be part of Microsoft, win back market share in the developing countries.
Llamas said his assumption was that the fee-less Windows phones in those markets may sell for less, but, since they have memory and other higher-end hardware requirements, their price may only drop by $20 to $30 or so. He noted that price will be a driver in those markets, plus Lumia X phones will have access to the much more plentiful Android apps. So, Windows Phones are not out of the woods yet in those markets.
While Android smartphone sales are hurting Microsoft's phone market share, they are helping its bottom line. Last year, an analyst from the financial firm Nomura estimated that Microsoft pulls in about $2 billion annually from royalties on its patents related to the open-source operating system. Interestingly, the analyst said the Android fees were being used to make up for losses in its Xbox division.