It’s a race to the bottom between Microsoft and… I dunno… HTC? Read:

Microsoft recognizes that the cost of creating a premium handset to compete at the high-end of the smartphone market against Apple’s iPhone and the Samsung Galaxy S3 is an enormously expensive and risky proposition.

“Making that ‘hero’ smartphone isn’t necessarily the best use of Microsoft’s resources and time,” said IDC analyst Kevin Restivo. “The race (in the smartphone market) is to the bottom.”

So instead, the company is looking to gain ground in emerging markets. In those markets, the smartphone business is particularly price sensitive.

Windows Phone will compete only in the bottom of the market, because Apple and Samsung have the top (and the middle) all sewn up.

There’s just one problem. Android is free for manufacturers to use, and easily customized or even forked to provide unique user experience. Windows Phone isn’t free, and must conform to Microsoft’s OEM guidelines.

So who is going to spend extra money for Windows Phone licenses to put on near-zero margin phones?

Train wreck ahead. Another one, I mean. Yesterday we talked about how Microsoft had no real strategy for mobile, and this is just one more sign of it. How are they going to build an ecosystem to help sell pricy tablets in the US, if they’re giving up the top end of the smartphone market? Nokia has shown how not to build and sell a top-end WP8 phone, and they’re Microsoft’s last remaining OEM with any real devotion to the OS.

The company isn’t going broke any time soon, but it looks increasingly likely that they’ll become yet another services company (like IBM, or like Dell is trying to become) devoted to the back of the office.