Microsoft launches two-for-one Lumia phone deal to slash excess inventory

Microsoft launches two-for-one Lumia phone deal to slash excess inventory

Pay for a Lumia 950 XL and Microsoft will kick in a Lumia 950, too

Microsoft today kicked off a two-for-one deal for its Windows-based smartphones, tossing in a free Lumia 950 when customers buy a $649 unlocked top-tier Lumia 950 XL.

The give-away will run until May 1, or while supplies last, Microsoft said on its e-store.

Last week, Microsoft told Wall Street that sales of its Lumia devices -- virtually the only smartphones powered by Windows 10 Mobile -- plummeted 73% in the March quarter compared to the year before, falling from 8.8 million in 2015 to 2.3 million in 2016. Revenue from its phone division fell 47%, to $662 million, in the first three months of this year.

More to the point of the two-for-one sale, on Thursday, Microsoft's chief financial officer, Amy Hood, said, "Sell-through of our Lumia products was weak, and we exited the quarter with relatively high channel inventory." Simply put, poor sales left more than the expected number of devices in stores and warehouses.

The buy-one-get-one-free deal may be Microsoft's way of flushing out the current overstock.

Buyers in the U.S., Canada and Puerto Rico will receive a $549 unlocked Lumia 950 when they purchase an unlocked Lumia 950 XL. The latter is Microsoft's top-of-the-line Windows 10 Mobile smartphone, which went on sale in November 2015.

The offer is limited to two Lumia pairs per customer.

Microsoft's smartphone business continued to drag down the Redmond, Wash. firm's overall revenue outlook. While Hood did not pin a dollar amount to Lumia's impact on the June quarter, Microsoft's final in its 2016 fiscal year, she acknowledged that, "We expect year-over-year revenue declines to steepen in Q4 as we work through our Lumia channel position."

In hindsight, her comment was a hint of the two-for-one offer.

The company's attempt to compete with Apple, Samsung, and a host of others has been a disaster. Last year, Microsoft wrote off virtually all of its investment in Nokia, the previous manufacturer of the Lumia line. Altogether, Microsoft blew about $10 billion on its venture into smartphones.

At the time of the write-down, CEO Satya Nadella said, "In the near-term, we'll run a more effective and focused phone portfolio while retaining capability for long-term reinvention in mobility."

With sales of only 2.3 million smartphones over three months, even that retrenchment of expectations now appears overly optimistic. By comparison, Apple sold about 61.2 million iPhones in the first quarter of 2015 -- the most recent March quarter available -- or about 2.3 million every three-and-a-half days.

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