Microsoft Corp. is talking to HTC Corp. (2498) about adding its Windows operating system to HTC’s Android-based smartphones at little or no cost, people with knowledge of the matter said, evidence of the software maker’s struggle to gain ground in the mobile market.
Terry Myerson, head of Microsoft’s operating systems unit, asked HTC last month to load Windows Phone as a second option on handsets with Google Inc. (GOOG)’s rival software, said the people, who asked not to be identified because the talks are private. Myerson discussed cutting or eliminating the license fee to make the idea more attractive, the people said. The talks are preliminary and no decision has been made, two people said.
Its willingness to add Windows as a second operating system underscores the lengths to which Microsoft will go to get manufacturers to carry its software. HTC, the first company to make both Windows and Android phones, hasn’t unveiled a new Windows-based handset since June and has no current plans to release any more, said one person. Microsoft, with 3.7 percent of the market, is finding it necessary to make concessions after agreeing to acquire Nokia Oyj (NOK1V)’s handset unit, which competes with other smartphone makers.
Myerson was planning to visit Asia this month and meet with senior executives at Taoyuan, Taiwan-based HTC to discuss his proposal, one of the people said.
Redmond, Washington-based Microsoft is trying to line up other new partners. Chief Executive Officer Steve Ballmer and other executives met with handset makers last week during a trip to Beijing, said a person with knowledge of their trip. They stressed that Microsoft wants to keep working with partners other than Nokia, and expects to be able to sign accords with some phone makers who previously have focused on Android, the person said.
The technical details have yet to be ironed out. It wasn’t clear whether an HTC phone would run Windows and Android at the same time, or let users choose a default.
Tony Imperati, a spokesman for Microsoft, declined to comment. HTC didn’t respond to a request for comment.
Microsoft’s $7.2 billion takeover of Nokia’s handset business is part of an effort to ensure the availability of phones with its software and help boost demand for the devices.
Microsoft charges handset makers a license fee for every Windows Phone sold, and also has agreements in place to collect royalties for devices that use Android as part of patent settlements. By contrast, makers of Android devices don’t pay Google, and instead agree to preinstall the Mountain View, California-based company’s services such as search and maps on Android-based phones.
Windows held a 3.7 percent share of the smartphone operating system market in the second quarter, according to research-firm IDC. Android dominated with 79 percent, while Apple Inc. (AAPL)’s iOS was No. 2 with a 13 percent share.
HTC, once the top-selling smartphone maker in the U.S., has posted declining global sales and market share as product and marketing missteps led to gains by Samsung Electronics Co., LG Electronics Inc. and ZTE Corp. (763)
HTC reported today a third-quarter net loss of NT$2.97 billion ($101 million) in the three months ended September, the company’s first loss on a consolidated basis since at least 2008, according to data compiled by Bloomberg. HTC’s flagship One handset has failed to arrest a slide in sales amid product delays and changes to strategy.
Samsung was the top Android phone seller in the second quarter, while HTC was No. 8, according to IDC. In Windows Phones, HTC lagged behind Nokia and Samsung.
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