All players except Apple have cut down their smartphone prices
In the previous part of this series, we discussed how Amazon (AMZN) could enter into the smartphone market with lower-priced products. Introducing lower-priced products is nothing new in the smartphone market. Google’s (GOOG) Android-based smartphones are known to sell at a cheaper price, and some of the smartphones sell below $100 in emerging markets like China and India. Only Apple (AAPL) has never introduced a new iPhone at a lower price, as it believes in catering to the premium market.
During the recent installment of Asia’s largest computing show, Computex, Microsoft (MSFT) announced that it will start selling smartphones and tablets running its software at below $200. According to the Wall Street Journal, citing Microsoft’s vice president of OEM partners, Nick Partner, as the source, “We’ll reach price points that are very industry competitive for 7, 8, 10-inch devices. They will really surprise you. Last year, we were in the 3s, 4s, 500 dollars. This year, we’ll be 1s, 2s, 3s.”
Microsoft would be keen to revive its fortunes in the smartphone operating system market
Microsoft’s presence in the smartphone operating system market is minuscule, and it has a share of about 3%. As the chart above shows, Android is the dominant player in this market, with Apple a distant second. Microsoft and BlackBerry (BBRY) have a negligible presence in this market, so Microsoft would be keen to resurrect it. By cutting down smartphone prices, running Microsoft’s software is one way it can revive its market share.
Microsoft has started to take the right steps
A couple of months back, Microsoft announced that it’s making Windows free for less-than-nine-inch devices—every smartphone and smaller-screen tablets. Making Windows free on smartphones and tablets was a smart move from Microsoft, as it will help make the Windows Phone cheaper and thereby help increase its sales. Increasing Windows Phone sales is very important for Microsoft, as it will help attract more developers, who will create more apps and thereby help develop the Windows apps ecosystem.
Then, recently, Microsoft completed its acquisition of Nokia (NOK). Owning Nokia should make Microsoft’s operations more comparable to Apple’s and Google’s, which make their own mobile hardware. Nokia would also help Microsoft enhance its supply chain and distribution capability.