Microsoft Windows Phone: Free to OEMs?

Microsoft (MSFT) is said to have offered its Windows Phone mobile OS free of charge to two India-based OEMs, perhaps signaling the vendor is willing to forgo licensing fees for a greater stake in emerging markets.

The Times of India reported that India-based phone makers Lava and Karbonn—part of a group of nine newcomers to the platform Microsoft disclosed at the recent Mobile World Congress—committed to develop Windows Phone-based handsets only when the vendor agreed to waive its licensing fees. The Times relied on industry insiders privy to Microsoft’s negotiations with the Indian handset makers who confided the deals got done only when the vendor broke with its longstanding policy and elected not to charge for its OS.

Both Lava and Karbonn already produce Google (GOOG) Android-based smartphones. Google doesn’t charge device makers to license Android but instead gains revenue from ads and media sales. Might deep-pocketed Microsoft be trying to beat deep-pocketed Google at its own game? Maybe, but offering mobile device makers—at least those unconvinced of Windows Phone’s market strength—the maneuverability to experiment with the platform to see how much sales it drives is far a more significant move. That alone is classically un-Microsoft-ish.

The chief questions surrounding the strategy are, Will it encourage hardware OEMs to make more Windows Phone devices and lure developers to both platforms? Or will it be seen as a marketing ploy and fall flat?

Without question, Microsoft recently has upped its Windows Phone game, collaborating with mobile chip maker Qualcomm (QCOM) on a new building-block reference design that includes hardware, software and development tools to pave the way for OEMs and ODMs to produce low-cost Windows Phone-equipped smartphones for growth markets. The design platform, which is anchored by Qualcomm’s low-end targeted Snapdragon 200 and 400 series apps processors, aims to allow hardware makers to save on engineering costs, allowing them to focus on differentiating their offerings based on apps and services.

In addition, Microsoft has opened a Windows Hardware Partner Portal to offer information to hardware device makers that might convince them to develop on the Windows Phone platform, including services, the app catalog and features.

Word first surfaced late last year that Microsoft was kicking around the idea of giving OEM device makers Windows Phone for free, forgoing the licensing revenue that comes with those platforms in exchange for improving the tilt of the battlefield a bit more in its favor.