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Why Microsoft is giving Windows away on small devices

Microsoft CEO Satya Nadella in front of the new Cortana logo as he delivers a keynote address during the 2014 Microsoft Build developer conference on April 2, 2014 in San Francisco.
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Microsoft CEO Satya Nadella in front of the new Cortana logo as he delivers a keynote address during the 2014 Microsoft Build developer conference on April 2, 2014 in San Francisco.

For all its talk of being a devices and services company, Microsoft still gets a large chunk of sales and the bulk of its profits from Windows and Office. So why on earth would it give away the crown jewels?

It can't afford not to in the mobile arena. By limiting the giveaway to phones and small-screen tablets, Microsoft hopes it can finally gain share in those fast-growing areas while protecting its lucrative franchise in Windows for full-scale PCs.

On the phone side, Microsoft has very little to lose. The company has been getting some revenue from Windows Phone, but Nokia makes up the lion's share of the current Windows Phone market — and it will soon be a part of Microsoft. HTC and Samsung make some Windows Phones, but aren't paying Microsoft enough to really amount to serious money.

Re/code has the whole story.

By Ina Fried, Re/code.net.

CNBC's parent NBC Universal is an investor in Re/code's parent Revere Digital, and the companies have a content-sharing arrangement.

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