Microsoft envisions $100 Windows Phones

Posted by Mark Raby

Here's another way Microsoft hopes it can compete in the hyper competitive smartphone race - price.

While today's smartphones are certainly much more affordable than they were just a few years ago, there's still a huge segment of the population that walk into a mobile phone store and want to walk out with a new phone, without a big immediate impact on their wallet.

So a $250 Verizon Thunderbolt is out of the question. So too are the myriad smartphones priced at what has become the industry standard of $200. But bring that price tag down to $99.99, and then you're talking about a whole new audience.

Microsoft thinks it can get that audience with Windows Phone 7.

As quoted by the company's official press site, Windows Phone division president Andrew Lees said at a recent event, "If you look even at the price of smartphones, a year ago all smartphones cost over $400 when they left their hardware manufacturer. Today, they're down to about $200, and next year, a smartphone that can run something like Windows Phone 7 will actually be down to $100 to $150."

Interestingly, the software giant has previously said it hopes to offer Windows Phone apps that are more expensive than the standard $1-$2 fare found on the iTunes App Store and Android Market.

So perhaps Microsoft wants to pull in consumers with low hardware prices and then lure them into buying more expensive apps - a higher-margin sector where it can rake in more profit.

It also helps that Microsoft's partnership with Nokia will kick in at the end of this year. Nokia has managed to reach huge economies of scale, allowing it to manufacture devices at a more cost-effective rate than most other companies.

And that is key if Microsoft plans to emerge in areas where Nokia still has a dominant presence - in under-developed countries where people use their phones as their only means of electronic communication. If it's possible to overlay Windows Phone 7 in those already-dominated-by-Nokia parts of the world, it could lead to cheaper costs to other markets as well.

Regardless, offering a more affordable smartphone solution is certainly a keen strategy to compete against Android and iOS phones, which may not be so quick to drop in price otherwise, so this may work.