As they say, success comes at a price, and Steve Ballmer is no exception to that rule. The question on investors minds was what was he willing to pay to beat Google and Apple at their game. Doing the math, that answer is now known, and it comes out to $230.00 per phone. Microsoft and Nokia are in a joint venture to gain market share for Windows phones in its battle with Google Android. Last quarter Microsoft payed Nokia $250 million and Nokia claims to have shipped 1 million units. It's not known how many units are still sitting in inventory but doing the math that breaks down to MS paying out $250.00 a phone. Part of the agreement stipulates that Nokia pays Microsoft a licensing fee for each phone it sells. The exact details of the license fee are not known, but some have speculated that it amounts to $20.00-$30.00 per phone. Essentially Microsoft payed Nokia $250.00 to receive $20.00 or $30.00. You see where this is leading? The Lumia 710 went for $50.00 on contract so it cost Microsoft $230.00 for that same phone that the customer just bought for $50.00.
You're probably wondering what the heck is wrong with Microsoft and how did they get to this point. First off with $50 billion in cash laying around, paying out $250 million is chump change for the software giant. Secondly, Ballmer recognizes that Microsoft has fallen way behind and a big price must be paid to catch up. They find themselves in a very precarious position because their life or death falls on Nokias shoulders. That's not a great position to be in, but here they are. They are banking on the high end Nokia Lumia 900 to compete in the market and make an impact. The Lumia 900 was a hit at CES. It was the talk of the show and blogosphere favorite. The handset is packing a serious punch with its: 4.3-inch ClearBlack AMOLED 800 x 480 capacitive touchscreen, 512MB RAM, 8-megapixel camera with a 28mm f/2.2 Carl Zeiss lens (dual-LED flash), polycarbonate-body, with a single-core 1.4GHz Qualcomm Snapdragon. A bonus, but not the biggest bonus, is that the handset will be packing an LTE modem. The biggest bonus lies in the fact that the smartphone will be offered at a mind blowing $99.99 on-contract. That low price is truly a game changer. Similar spec'd Android phones go for $199.99 on-contract and we all know how consumers love a great bargain. The stakes are high, and if Microsoft successfully pulls this off, Google just may have something to worry about.