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Microsoft thought to make far more revenue from Android than WP7

by Scott Bicheno on 27 May 2011, 18:46

Tags: Microsoft (NASDAQ:MSFT), HTC (TPE:2498)

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Paying the price

If I suggested that one of the biggest beneficiaries of every Android handset sold was Microsoft you'd think: ‘Yeah, OK Scott, maybe it's time to stop writing for now and gather your senses over the weekend.' But bear with me on this one.

An analyst has estimated that Taiwanese smartphone giant HTC pays Microsoft five dollars for every Android phone it sells, reports Business Insider. Why would it do such a thing? Because Microsoft owns a bunch of patents for technology used in Android, and HTC came to an arrangement with Microsoft a year or so ago to pay it for the privilege of using them. This analyst reckons it comes to five bucks a pop.

The story also mentions that Microsoft is suing other Android handset-makers, looking for around ten dollars per device in that case. However it seems to have singled out Motorola for its legal ire, which is coincidentally one of its few former mobile partners to completely abandon WP7. We're not aware of the likes of Samsung and LG suffering a similar fate, despite both selling more Android handsets than Moto.

And it looks like Microsoft is in a reasonably strong position, thanks in part to the fact that Google has little IP of its own to horse trade with, which is often the way these patent spats are resolved. We have to assume Microsoft had a reasonably strong case, or HTC wouldn't be handing over such a large chunk of its margins, and we also have to assume OEMs not currently being sued by Microsoft have come to a similar arrangement.

Analyst blogger Horace Dediu wasted little time in looking into the implications of this revelation. He reckons Microsoft has admitted shifting around two million WP7 licenses, and at an estimated cost per license of $15, providing revenue of $30 million. But with estimated HTC Android sales of 30 million units, that would mean Microsoft gets five times as much revenue from that source than WP7 itself.

Dediu entitled his blog post Microsoft has received five times more income from Android than from Windows Phone, but that only includes HTC. Surely the likes of Samsung are at least compensating Microsoft in kind for the use of the same patents, so the net benefit to Microsoft of these patents potentially runs into the hundreds of millions.

In fact, the whole Android ecosystem has the potential to be a feeding frenzy for patent litigation, with Apple and Oracle among the other giants to have a go, and Google looking somewhat cavalier about its approach to IP. The worrying thing for Android OEMs is that much of the litigation is directed at them, rather than Google itself.

The icing on the cake for Microsoft could be if, as a result of all this patent litigation, WP7 actually ends up being cheaper than Android, which Google itself charges no license fees for. Maybe Nokia didn't make such a bad call after all.


HEXUS Forums :: 4 Comments

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I wonder how much more Samsung make from selling to Apple than they do from Bada. Is that a similar comparison, I don't know. Either way if people keep up patenting everything this is how it goes.
Samsung make nothing from Bada as it's an OS on their own platform for their own devices, it is akin to Apple selling iOS, they make practically nothing off anything even peripheral sales

Good business work protecting potential future threats though, got to give them that
From what I read somewhere else (I can't find it now) it wasn't patents that they held against the Android OS it self, but the on the file system used on the memory cards (FAT32), hence why they go after the handset manufacturers rather than Google directly as Oracle are doing. Bear in mind this may be a load of rubbish though :p
Fascinating article. :hexlub:

It does leave me with the question though - if MS stands to make more money from Android than WP7, then surely shouldn't it be doing more to support Android (OfficeLite for ‘droid?). Note, I’m not saying that MS should be promoting Android - because (a) that would be silly (given they're suing) and (b) look like entrapment (because they're suing). Perhaps offer “reasonable” license terms for their IP?

From my naive point of view, MS doing apps for Android would be a good thing for them - helping to sneak MSware into the Android arena, which makes it easier to justify MS OS's on your servers (talking about business use) or make it easier to use Win7/8 desktops (for home use).