Stowe Boyd

The company [Microsoft] could spend a half-billion dollars or more in marketing costs and payments to developers and handset manufacturers to subsidize the expense of building phones and apps, so that the Windows Phone 7 ecosystem is well-seeded at launch.

Jonathan Goldberg, a telecommunications analyst at Deutsche Bank, estimates that Microsoft will spend $400 million on marketing alone for the Windows Phone 7 launch. That doesn’t include the millions it has already committed to pay for “non-recurring engineering” costs that help offset development costs for handset manufacturers.

“This is make-or-break for them. They need to do whatever it takes to stay in the game,” says Goldberg. “It’s still wide open. They don’t have to take share from Android or Apple, so long as they can attract enough consumers switching from feature phones.”

On a visit earlier this month to the company’s headquarters in Redmond, Goldberg says company executives told him that Microsoft, along with its carrier and manufacturing partners, would likely spend “billions” of dollars in the first year for marketing and development. Another source familiar with Microsoft’s manufacturer and carrier agreements says the company will spend $1 billion on the launch, half on marketing and half on other development costs.