Microsoft's next cash cow - Android!

Microsoft's next cash cow - Android!

Summary: Microsoft is raking in $5 for every Android handset HTC sells thanks to a lucrative patent settlement, according to Citi analyst Walter Pritchard.

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Microsoft is raking in $5 for every Android handset HTC sells thanks to a lucrative license deal, according to Citi analyst Walter Pritchard.

What's more, the Redmond giant is putting the squeeze on other Android handset makers and is looking for an incredible $7.50 to $12.50 per device. And Microsoft is likely to be able to negotiate these settlements, because as Pritchard says, "Google appears to have very little IP to defend itself with."

In other words, Microsoft has Android over a barrel.

Man, patent settlements are might lucrative, so lucrative in fact that Asymco believe that Android is earning Microsoft five times more income than its own Windows Phone operating system.

Microsoft has admitted selling 2 million Windows Phone licenses (though not devices.) Estimating that the license fee is $15/WP phone, that makes Windows Phone revenues to date $30 million.

In a market where Android OEMs are working to an operating margins of between 10-15%, this is a lot of money hemorrhaging away. Android tablet operating margins are absolutely razor-thin, at between 2-3%. OEM settlements here along the same magnitude as those for handsets could have a very chilling effect on tablets.

I've been saying for some time now that patents will become Microsoft's new cash cow to help bolster up the bottom line as people spend less on new PCs and software. It's an amazing pot of gold to plunder.

So, buy an Android HTC handset, or a Windows Phone handset, and it's money straight in Microsoft's bank account.

Microsoft's not the only one throwing its legal weight around when it comes to Android. Here's a handy chart drawn up by Pritchard:

Click for larger image

Topics: Legal, Enterprise Software, Hardware, Microsoft, Mobility

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38 comments
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  • Yes, but ...........

    if the manufacturers feel it is bullying or extortion, they will try to stick it to MS every chance they get. It could be WP7's ultimate undoing.<br><br>MS does not seem to make a lot of friends.<br><br>Edit: Maybe the manufacturers can start selling smart phones with no OS, and the customers can load their own custom ROM. If it is made simple enough, a good chunk of consumers might do it. Sort of like Linux all over again. If the customers load a custom Android version, MS can always try to sue the hackers or the individual customers for the 5 or 10 bucks. Good luck with that. :-)
    Economister
    • RE: Microsoft's next cash cow - Android!

      @Economister
      "MS does not seem to make a lot of friends."

      Are you serious? How many OEMs does MS have relations with? More than any other computer company? More than *every* other computer company?
      x I'm tc
      • I said FRIENDS, not relations (nt)

        @jdakula

        NT
        Economister
      • RE: Microsoft's next cash cow - Android!

        @jdakula

        Relations does not mean they like each other. Relations does not mean you won't bolt from MS the first chance you get.

        Having relations with so many spreads VD and STD's.. :)
        itguy08
    • RE: Microsoft's next cash cow - Android!

      @Economister Yep, linux all over again. What is the current desktop market share of Linux?

      Sure seems profitable.

      The average consumer doesn't want to load an OS on their phone. If its more complicated than installing an app, its probably not going to happen.
      vel0city
      • So are you saying that ....

        @vel0city

        Linux has not had a HUGE impact on MS? Linux dominates supercomputing, the web, embedded and now mobile. In addition, these are different times, when MS does not have entrenched power in the new sectors.

        If I could load my own ROM on a cheaper smartphone, I would definitely do it. There is nothing like taking your power back.
        Economister
    • RE: Microsoft's next cash cow - Android!

      @Economister
      >>Maybe the manufacturers can start selling smart phones with no OS, and the customers can load their own custom ROM. If it is made simple enough, a good chunk of consumers might do it. Sort of like Linux all over again.

      Yes, because of this Linux is ruling the desktops, laptops, notebooks, netbooks world. You are absolutely right, they own 99% of PCs all over the world. Got it.
      Ram U
    • RE: Microsoft's next cash cow - Android!

      @Economister
      You are, like Steve Martin used to say, "a crazy guy!
      To make cell phones without OS just for the few people like you that care about such things. And you say, "Sort of like Linux all over again, you are kidding, right? Have you seen all those PCs stacked up at Best Buy, etc., all without OS, waiting for you and the two other guys that want them? Oh wait a minute, I am intruding into your nightmare again.
      Your ego is mighty big, even though also mighty foolish!
      Some of the people here, like you, really think that you guys matter. Wake up, you are just a dream in your own nightmare! LOL.

      "The Dominican"
      e_ecruz
    • RE: Microsoft's next cash cow - Android!

      @Economister <br>So you suggest that you should and I and everyone write software and give it away for free. Maybe suits you but doensn't suit me as a software developer. Do you work for free whatever you do? why do you expect software to be free? When I write software and people are using it I expect some money back. Let me also inform you that microsoft also gets money from apple and other companies for activesync.
      panoslondon1
    • Start working in IT

      @Economister ... I can't believe my eyes. So much junk in 8 lines of comments is .... probably a new record.

      "...will try to stick it to MS..." ... think about it. The telecoms sell services and phones. Why would they "stick it" to themselves? If they don't pay MS, they pay Google or RIM. It's that simple. The only thing they'll do is scare off their own customers.

      "start selling smart phones with no OS".... mmmhhhmmmhhh? How many PC's do you see without OS's? How many cars without engines? How many homes without electrical? Get this: Consumers want a complete product. They want to turn it on and know it's gonna work. If you think the average user wants to spend $75 per month and have to pick up a 500 page manual on installing this and that -- well, maybe you should get a part time job at something that deals in IT. I don't know ANYONE that does that. Heck... even I don't anymore. I stopped building my own PC's 7 years ago!!

      Good luck with THAT!
      rock06r
      • I have never...

        @rock06r et al <br><br>read so much fan boy garbage in my life. Linux and other open source SW has, and continues to, revolutionize computing, including beginning to threaten the desktop from below. You all must be very small minded individuals feeling threatened by what is happening. Otherwise you would not be able to come up with such a pathetic collection of responses.<br><br>There are already custom ROMs available, used to replace the stock ROM. It is not much of a stretch to sell a phone with no firmware at all (beyond basic BIOS like functions) and just install your "own" ROM. I guess my musings are giving you all nightmares.<br><br>As someone famous once said:<br><br>First they ignore you, then they laugh at you, then they fight you, then you win.<br><br>I guess Linux and Open source is well into stage 3 by now. How does it feel? You guys are all starting to freak out apparently. :-)

        Edit: And I am indeed surprised to learn that HTC is a carrier, or alternatively, that the carriers are paying the 5 bucks to MS.
        Economister
      • RE: Microsoft's next cash cow - Android!

        @economister, just keep on dreaming, and take the other two dreamers with you
        ozinanoypi
      • Intellectually bancrupt

        @ozinanoypi

        No rational argument at all? Just some grade school level snide comment? You seem to be typical of "the other side" since most of those posts seem to be of similar "quality" to yours.

        Utterly pathetic.
        Economister
    • RE: Microsoft's next cash cow - Android!

      @Economister

      I did not see any mention of a $$ per unit sold in the Microsoft press release ....
      BrentRBrian
    • RE: Microsoft's next cash cow - Android!

      @Economister selling a bare bones phone might appeal to some, however how many people out there buy a computer system with no OS.... for most its too much trouble to install and get a computer working.
      jvbutter
    • RE: Microsoft's next cash cow - Android!

      @Economister
      users don't care!! these are techy wars that have little or no meaning to end users. do u think your mum would love to install an OS on her phone just to "stick it to MS"? in order to win this war you need to understand the layman user - Apple does! Microsoft does! OS people don't!
      masukuma
  • Consumer Gets it in the End

    That $5 or $12.50 or whatever will simply be passed on to the consumer (you're already paying $300 for a device, would you even notice a $5 increase in price?) and written off as a cost of doing business. Android sellers won't even notice, neither will the public.

    The next question is will MS even notice? Given their capitalization, a $30 million revenue stream may not even make into the books as a separate line item.
    aureolin
    • RE: Microsoft's next cash cow - Android!

      @aureolin
      30 million is WP. Android may be many times that.
      x I'm tc
    • RE: Microsoft's next cash cow - Android!

      @aureolin $300 WTF? Most of the good phones are $79 to $199 tops... of course this is subsidized.

      As for Android, Unless Google pulls it completely in house they can just set up an open source project manager andwash their hands... What will MS do then?
      slickjim
      • WRONG!

        @Peter Perry SUBSIDIZED means you are paying MORE, not less.

        The up-front price may look low, but the TCO is high.
        wackoae