Microsoft's most profitable mobile operating system: Android

Microsoft has had trouble getting people to use its Windows Phone operating systems, however, it might make as much as $3.4 billion on Android phones.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

To some, Windows 8 is a marketplace failure. But its flop has been nothing compared to Microsoft's problems in getting anyone to use its Windows Phone operating systems. You don't need to worry about Microsoft's bottom line though. Thanks to its Android patent agreements, Microsoft may be making as much as $8 per Android device. This could give Microsoft as much as $3.4 billion in 2013 from Android sales.

Years of trying, running Nokia into the ground as a de facto Microsoft sub-division, and Windows Phone still has no marketshare worth speaking about.
Image: NetMarketShare

There's nothing new about this. Microsoft has been making hundreds of millions a year from Android since 2011. Where do these profits come from? Patent licenses. And if vendors don't want to pay, Microsoft will threaten patent lawsuits. Sometimes, Microsoft even follows up with an actual lawsuit.

The object, however, isn't to win in court. In recent months, Microsoft has convinced Foxconn, the world's largest contract electronics OEM, Nikon, ZTE, and numerous other Android OEMs that it's cheaper to pay off Microsoft by acquiring a patent license than it is to fight them in a lawsuit.

Today, only Motorola Mobility, a division of Google and Huawei, remains free of the Microsoft-Android intellectual-property (IP) tax. In a statement to Dow Jones Business News, Google spokesman Matt Kallman said: "This is the same tactic we've seen time and again from Microsoft. Instead of building great new products, Microsoft attacks the competition, and tries to drive up the prices of Android devices for consumers."

No case has ever been successfully made for any of Microsoft's undisclosed patents that are being used to profit from Android, but that's not what is important for businesses. The bottom line is that it's usually cheaper to pay off patent trolls than it is to fight them in court. Whether Microsoft's publicly undisclosed patents are valid or have any relevance to Android is beside the point.  

That's why Motorola Mobility's patent lawsuit against Microsoft is anything but done. In today's legal climate, the biggest companies use patents to battle over market share and patent licensing. Nokia, Microsoft, and Oracle's attempt to knock Android out of the European Union market as "a below-cost Trojan horse", is simply another tactic in their legal attempts to win profits from a market where Microsoft is unable to compete with its products.

Eventually, if Google is successful, then the Microsoft's Android patent tax will be contracted away in sealed settlement documents. Until that day, Microsoft will continue to profit from mobile operating systems — it just won't be from its own failed mobile operating systems.

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