Microsoft will reap $444 million in licensing fees from Android manufacturers this year, charging $3-6 per mobile device, according to a report from Goldman Sachs. This represents only 4 percent of Microsoft's projected revenue this year; clearly, collecting royalties is not a key part of Microsoft's mobile strategy. Or is it?
Goldman analysts seem to think so. In the report, the firm speculates that Microsoft is aggressively pursuing such deals to help it expand its nascent Windows Phone operating system, which will reach 4 percent of shipments this year compared to Android's 40 percent market share, according to IDC.
Manufacturers pay Microsoft $10-12 in licensing fees just to embed the Windows Phone platform, but according to Goldman, "we believe this licensing fee potentially could be negotiated if the handset manufacturer is willing to install and support Windows Phone on more devices."
If settling with Microsoft means you get a discount on the Windows Phone licensing fee and Microsoft lawyers off your back, why not? This may explain why HTC offers more Windows Phone devices than any other major Android developer and will debut Mango on T-Mobile (with the HTC Radar 4G and HTC Titan) and AT&T (the HTC Titan). Last month, PCMag mobile analyst Sascha Segan got some hands-on time with both devices.
Meanwhile, Samsung offers two Samsung Windows Phone devices and Motorola offers zero.
"Despite the royalties Microsoft is demanding for alleged patent infringement, we see its legal battles as playing a lesser role in its overall mobile strategy as compared to its desire to strengthen the ecosystem for Windows Phone going forward," Goldman's analysts conclude.
Who pays Microsoft what?
Within two years Microsoft has secured cross-licensing deals with seven mobile-related companies. HTC signed on in April 2010 and reportedly pays Microsoft $5-6 per device.
Since then, deals have been struck with Velocity Micro, General Dynamics Itronix, Wistron, Acer, ViewSonic, and as of Tuesday, Samsung.
Motorola is the lone hold-out among the major manufacturers, according to a snarky blog post written by Microsoft lawyers; not at all surprising now that Google's got Motorola's back.
Microsoft has also sued a group of companies for infringing on patents used in e-readers, including Barnes and Noble and Inventec, the manufacturer of the Nook.
How Nokia helps Microsoft in court:
When Nokia and Microsoft announced a strategic partnership in February, whereby Nokia would focus on developing Windows Phone-based devices, many noted the patent gains.
Goldman gives us the scoop: 30,000. Microsoft has the option of leveraging all these Nokia patents, which mostly relate to radio technology standards, multimedia/computer technologies, user interface, and more. Now with 78,555 patents at its disposal, compared to the 26,726 held by Google, Microsoft has plenty of ammunition into which its lawyers can dive.
For more, see What If Android Lost the Patent War?