Microsoft takes Android to the Bank

by Matt Klassen on May 31, 2011

Its irony so thick you could cut it with a knife: it looks like Microsoft is making more money off Android than its own Windows Phone OS.

The tech world has known for some time now that Microsoft is getting a piece of HTC’s Android action, as it was over a year ago that I wrote about the two companies signing a patent agreement following legal action on Microsoft’s part. The most recent twist, however, is just how much Microsoft has made off Android, and with recent reports stating that the Redmond-based company earns $5 per HTC Android smartphone sold; it’s a significant chunk of change.

To add to the irony, Microsoft has been a vocal critic of Google’s claims that Android is free, arguing that company’s using Google’s mobile OS still have to pay licensing fees, except the fees don’t go to Google, they go straight into Microsoft’s own pocket.

When it was revealed that Microsoft was charging a $15 per device licensing fee to use its Windows Phone 7 mobile OS, the mobile market was up in arms, arguing that both Android and Symbian were free options. At the time Microsoft fired back, stating that no mobile OS is truly free, but of course the PC giant kept quiet on the fact that it was the actually the culprit behind Android licensing costs.

According to Citi analyst Walter Pritchard, here’s how it all break down: To date, HTC has shipped an estimated 30 million Android handsets, with the licensing agreement paying Microsoft $5 from each phone sold. Breaking down the rough sales numbers, that works out to around $150 million dollars that Microsoft has earned on the backs of Android devices, while at the same time the company has sold only two million Windows Phone licences, and at $15 a pop, that works out to approximately $30 million, 1/5th of what its squeezed out of Android.

I will be the first to say that I may have underestimated Microsoft in the mobile race, as the company has clearly found a way to make its competitors’ products more expensive, while simultaneously earning money from its competitors’ successes. Google’s ‘free’ Android OS is now becoming more expensive, putting it on par with the licensing fees Microsoft charges for its own WP7 mobile OS, with Microsoft cashing in the whole way along.

Not to further underestimate the shrewdness of Microsoft’s business people, add to all this the report that Microsoft is seeking higher patent fees from other companies and other Android devices, somewhere in the range of $7 – $12, and I find myself in awe of what Microsoft has been able to accomplish.

Like it or not, Microsoft has managed to reach its fingers into a large piece of the mobile pie, finding ways of making money despite the relatively slow adoption rate of its WP7 OS. Now we’ll have to wait and see what Apple does, as it is also pursuing similar patent litigation wars against Android, wars that will almost certainly mean that Google’s free OS becomes a lot more expensive.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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