Entrance of Windows Phone 7 to the market will cost half a billion dollars

This holiday season Microsoft is making its another effort to firm its position at the mobile phone market with the launch of Windows Phone 7 phones. According to the estimates of the analysts and experts 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, as noted by the TechCrunch blog.

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.”

Visiting earlier this month 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.

“We have a long-term view and Microsoft has been in this position before in other businesses where we’ve had to take a long-term view,” says Microsoft senior product manager Greg Sullivan, who would not comment on the estimates. “The mobile phone market is growing by leaps and bounds, but it’s still in the early stages.”

In some cases, potential manufacturing partners have accepted payments only to later back out. Out of the original eight handset manufacturers that Microsoft announced Windows Phone 7 with in February, there’s serious traction left at just three—HTC, Samsung and LG, according to Goldberg. (The others were Dell, HP, Sony-Ericsson, Garmin-Asus, and Toshiba). Sullivan didn’t comment on the launch partners either. But HP, which was set to design and sell Windows Phone 7 handsets up until it acquired Palm in April, had a contract covering development costs over several years that could have been worth up to $20 million, according to a source familiar with the deal.