Is Microsoft Getting Desperate?

By Erin Kennedy, Jamal Carnette, and Evan Niu, CFA – Oct 7, 2013 at 10:30PM

NASDAQ: MSFT

Microsoft

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Microsoft might be willing to cut smartphone vendors a deal with licensing fees. That could even mean giving Windows Phone away for free in an extreme case.

Reports have surfaced that Microsoft (MSFT -1.84%) may be trying to win back smartphone manufacturer HTC. Part of this aggressive strategy could potentially entail eliminating or reducing Windows Phone license fees. That could help Microsoft grow its market share, but it would also undermine its business model of selling software licenses.

Google (GOOGL 0.35%) has taken over the smartphone world by making Android open source, relying on services to monetize users. That's not something Microsoft can rely on, since its services businesses are small compared to its core software segments.

HTC is interested in moving away from Windows Phone as the OEM itself is struggling. The company just reported its first quarterly loss as a public company, and Microsoft's proposed acquisition of Nokia's handset business probably just adds to the tension.

In this segment of Tech Teardown, Erin Kennedy discusses Microsoft's possible move with Jamal Carnette and Evan Niu, CFA.

Erin Kennedy, Evan Niu, CFA, and Jamal Carnette have no position in any stocks mentioned. The Motley Fool recommends and owns shares of Google. It also owns shares of Microsoft. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.