Windows Phone Pricing Strategy Carries Risks

Microsoft is risking big with its diverse Windows Phone pricing strategy, which raises the specter of fragmentation.

The third pillar of Microsoft€™s Windows Phone pricing strategy is apparently underway.

High-end Windows Phone devices represented the first pillar. However, in the year-plus since Microsoft began rolling out offerings in that price range, the company€™s overall share of the smartphone market refused to budge. Granted, users abandoning the now-antiquated Windows Mobile contributed a fair amount to that market-share drag€”but that doesn€™t negate the fact that, despite some handsome devices, Microsoft and its manufacturing partners never came up with a viable competitor to Apple€™s iPhone or Motorola€™s Droid line.

More recently, Microsoft began a push into the midmarket, as exemplified by the Samsung Focus Flash and Nokia€™s Lumia 710. Both smartphones retail for $49 with a two-year contract.

Now comes that third one: low-end devices. Nokia, which has assumed the flagship position for the Windows Phone line, has introduced the Lumia 610.

By offering Windows Phone devices at a variety of price points, Microsoft is walking something of a tightrope. It needs to expand its user base but can€™t risk fragmentation. Windows Phone software, originally developed for high-end devices, will also need to undergo modifications in order to provide a quality experience on lower-end hardware.

The next version of Windows Phone, reportedly code-named Tango, will meet these low-end goals by requiring only 256MB of RAM. Microsoft seems to have already started prepping third-party app developers to the shift. €œIf your application will not function properly on a 256MB device, you can opt out of this device category on marketplace,€ read a note posted to MSDN Feb. 23.

After that, Microsoft€™s plans become a bit more opaque. According to February reports on and Supersite for Windows, Microsoft is prepping a Windows Phone 8 that will support multi-core processors and native BitLocker encryption, and integrate in many ways with the upcoming Windows 8. Both those blogs painted a picture of a mobile operating system loaded with features and optimized for power users (hence the multi-core), which raises the question of how (or even if) it will play with lower-end devices. If Microsoft splits its mobile road map between low-end Tango devices and hardware running Windows Phone 8, then it potentially faces some Android-caliber fragmentation issues.

That€™s obviously a scenario, however hypothetical, that Microsoft would like to avoid if possible. But as long as the company remains determined to play at all price points, these issues will indeed arise in future quarters.

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