There may not have been hordes of people camping out at AT&T (T) stores around the country over the weekend for Sunday's debut of the Lumia 900 -- a Nokia (NOK) smartphone. But there's plenty riding on the $100 device, especially for Microsoft (MSFT).
Lumia 900 is the flagship phone of Microsoft's fledgling Windows Phone, the mobile operating system that Microsoft hopes hasn't arrived too late in the game to take on Google's (GOOG) Android and Apple's (AAPL) iOS. And consumers may indeed quickly warm up to a device, despite its currently unpopular mobile operating system. Here's why:
1. Microsoft Is Pouring Billions Into Promotion
When Nokia agreed to crank out a series of handsets based on Windows Phone last year, CEO Stephan Elop boiled it down to money.
"The value transferred to Nokia is measured in Bs not Ms," Elop said at the time, implying that Microsoft was paying the Finnish handset maker billions -- not millions -- to back Windows Phone. Lumia 900 may be the flagship smartphone, but there will be a lot more models rolling out in the coming months and years.
It's not the only way that Microsoft is paying up to make sure that the Lumia 900 gets noticed. Beyond the heavy in-store promotion within AT&T centers, Microsoft also launched a celebrity-backed "Free-Time Machine" campaign where it will reward 200,000 instant prizes through select city initiatives and a new FreeTimeMachine.com website.
2. It Gives On-the-Go Workers an Office Suite
There may be a lot of people with cynical opinions when it comes to Microsoft, but its Office productivity suite is the top dog in its field.
There's a good chance that you deal with Word, Excel, or PowerPoint documents on a regular basis. Sure, there are plenty of third-party apps on other smartphones that let you work with those documents, but this is the only platform with an Office Hub that lets users seamlessly manipulate the files on their phones.
Despite all of the rumors of Microsoft offering Office for iOS -- something that may very well happen -- the Lumia 900 is being pitched for the premium productivity that is built into the handset.
3. Microsoft Is Greasing Developers
"There's an app for that," has been one of the rallying cries for the iPhone. The handsets aren't cheap. The wireless carrier data plans are expensive. However, iPhone owners know that they have access to hundreds of thousands of applications -- and many of the good ones are available for free.
Many developers were initially hesitant to support Android, but the popularity of the open-source platform created an audience that was too large to ignore.
If developers had any say in this, that would be it. Why port a hot title to as many mobile operating systems as possible? Having dedicated teams for different devices, and their perpetual updates, doesn't come cheap.
Microsoft knows this, and that's why it's making sure that it now has many popular applications among the 70,000 it currently offers during this week's launch. According to The New York Times, Mr. Softy is cutting checks to help offset some of the development costs that run between $60,000 and $600,000.
Love Angry Birds? No problem. It's coming too.
4. Gamers are Going to Love This
Sony (SNE) tried to blend mobile with gaming when it teamed up with Ericcson to put out the Xperia Play smartphone last year. The handheld gaming device it introduced domestically earlier this year -- PS Vita -- pitches the mobile element of on-the-go gaming.
Sony hasn't gained a lot of ground with either product; the same can be said about Sony's gaming presence now that Microsoft's Xbox has become the platform of choice.
Xbox LIVE is a built-in feature of Windows Phone.
For now, that means little more than checking out achievements and Gamerscore tallies. Xbox LIVE subscribers can also see when their friends go online. An Xbox Companion app promises to let Lumia owners control their consoles, but likely in a limited fashion.
However, with tens of millions of Xbox LIVE subscribers, a phone that connects gamers to their diversions is obviously going to help Microsoft.
5. The Price Is Right
Selling for half as much as the cheapest iPhone 4S -- even if it's tethered to the same two-year contract through AT&T -- is also going to boost sales.
Microsoft has more than just its reputation at stake here. It means business, and it's willing to cut big checks until it succeeds.
Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Nokia, Apple, Microsoft, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple.
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Company: GAMCO Investors (GBL) Total 2010 compensation: $56.6 Million
GAMCO didn't do very well for investors in 2010. The price of the company’s shares was flat, considerably underperforming the S&P 500 increase of 14% that year. The company manages mutual funds and other investments for private individuals and public enterprises.
But GAMCO had a relatively good year in terms of revenue and earnings growth. Revenue rose from $218 million in 2009 to $280 million. EPS was up from $2.03 to $2.55.
Even so, based on the relatively small size of the company and GAMCO’s overall performance, Gabelli is overpaid.
Company: Aetna (AET) Total 2010 compensation: $57.8 million
Aetna’s shares were down 7% in 2010, underperforming the S&P 500 by a large margin. But Williams’ pay was based on several factors, none of which was stock price. EPS, pre-tax operating margins and an increase in the dividend were the major measures of his performance, according to the board.
The board can make the case, persuasively, that the insurance firm had a good year financially in 2010. The company’s EPS rose from $2.84 in 2009 to $4.18 last year, even though revenue fell slightly from $28.3 billion to $27.6 billion. Williams retired in 2011. The board gave Williams a relatively reasonable package as he left, at least based on 2010 performance.
Company: Vornado Realty Trust (VNO) Total 2010 compensation: $64.4 million
Vornado’s shares significantly outperformed the S&P 500 in 2010, up over 17% for the year. The board says it relies on EBITDA and total return to shareholders to set CEO pay. Both improved in fiscal 2010 compared to 2009 as EBITDA rose from $1.7 billion to $2.2 billion. Vornado produced strong financials on a GAAP basis as well. Net income per share rose to $3.24 in 2010 from $0.28 the year before. Revenue rose from $2.7 billion to $2.8 billion. Fascitelli is a CEO who earned what he made.
Company: Polo Ralph Lauren (RL) Total 2010 compensation: $66.7 million
The clothing designer and manufacturer gave investors an extremely good return on their holdings in 2010, as share price jumped 35%. In the fiscal year that ended April 2, EPS rose from $4.85 to $5.91, and revenue grew by 13% to $5.7 billion.
The one question investors might ask is whether Lauren’s compensation is based on fair deliberations by his board. The CEO owns shares that hold 75.6% of the corporation’s voting rights.
Company: General Growth Properties (GGP) Total 2010 compensation: $66.7 million
When it comes to how investors in General Growth fared, timing was a major factor: Did they buy in before or after it emerged from Chapter 11?
The company entered bankruptcy in April 2009, and it became clear as early as April 2010 that it would exit Chapter 11 later in the year. The company returned to regular operations when the final reorganization was approved last November. The gain in the company’s shares from early 2010 to the end of the year was 14-fold.
While the bankruptcy process makes it impossible to make reasonable P&L comparisons from 2009 to 2010, revenue has remained steady. Metz earned his money for those who took a chance on the company’s stock early last year.
Company: CVS Caremark (CVS) Total 2010 compensation: $68.1 million
CVS Caremark shares underperformed the market last year, rising only 8%. That alone makes it hard to justify Ryan’s compensation. The company's financial results were also poor. Revenue fell from $98.7 billion in 2009 to $96.4 billion in 2010, and EPS fell from $2.55 to $2.49.
Company: Verisk Analytics (VRSK) Total 2010 compensation: $68.4 million
Verisk slightly underperformed the market with its shares rising 14% for the 2010 calendar year. For that return, Coyne's pay package is extravagant. Still, Coyne should get credit for a relatively strong year in other ways. EPS rose from $0.72 in 2009 to $1.36 in 2010. Revenue rose from $1 billion to $1.1 billion year-over-year.
Company: TRW Automotive (TRW) Total 2010 compensation: $76.8 million
TRW shares soared during 2010, ending the year almost 105% higher. The extraordinary performance was driven by EPS, which rose from $0.51 to $6.49, as revenue moved from $11.6 billion to $14.4 billion. TRW, which supplies car parts, benefited from the rebound in the auto industry, but Plant’s compensation is reasonable based on the results he delivered to shareholders.
Company: Omnicare (OCR) Total 2010 compensation: $98.3 million
Gemunder’s 2010 pay package can't be justified based on shareholder returns. The firm’s stock was up only 2% for the period. It's no wonder the shares didn't do better: The company’s EPS fell from $1.81 in 2009 to a loss of $0.91 in 2010. Revenue fell from $6.2 billion to $6.1 billion.
Company: McKesson (MCK) Total 2010 compensation: $145.3 million
McKesson’s shares were up 13% in 2010, underperforming the S&P 500. And while its revenue was $112 billion in 2010, up from $108.7 billion in 2009, EPS fell from $4.62 to $4.29.
In that light, it is hard to imagine how the board of McKesson could have justified giving Hammergen such an extraordinary compensation package.