One key revelation out of Microsoft’s acquisition of Nokia’s handset business is we get a fair idea of how much Microsoft made by licensing Windows Phone platform to Nokia and other partners like HTC and Samsung. According to a Microsoft presentation explaining the deal, the company has revealed that it makes less than $10 per unit of royalty gross margin. On top of it, Microsoft had to pay a platform support fee to Nokia and also make substantial investments in marketing Windows Phone.
Instead of doing that, Microsoft claims, it could make more than $40 of gross margin per unit with Nokia and also have an integrated hardware R&D and design. It would also have a focused marketing investment. Microsoft claims that its operating income will break even when the smart device units shipments exceed 50 million. Currently, based on Nokia’s last quarter run rate, it is headed for a 30 million units annually.
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