Microsoft Signs Android Patent Deal With Samsung, Leaves Google Fuming!

by Gaurav Kheterpal on October 4, 2011

Microsoft’s love for Android is a fairly well-documented affair at TheTelecomBlog. In May, Microsoft first took Android to the bank by getting a piece of HTC’s Android action. To date, HTC has shipped an estimated 35 million Android handsets, with the licensing agreement paying Microsoft $5 from each phone sold.

The Redmond giant then followed it up with another patent-licensing deal with General Dynamics Itronix. Even as Google threatened to retaliate, Microsoft publicly stated its intentions to continue milking the Android cash cow.

In what has to be the biggest Android patent licensing deal till date, Microsoft last week signed an agreement with Samsung to ‘cross-license their patent portfolios.’  Though Samsung declined to reveal how much it’s paying, it’s widely believed that Microsoft could be getting as much as $15 for each Android phone Samsung sells.

To put things in perspective, it’s believed that Microsoft will generate $444 million in revenue from Android patent deals for fiscal year 2012.

As part of the Samsung deal, Microsoft said it will receive royalties for the former’s mobile phones and tablets running the Android mobile platform. In addition, the companies agreed to cooperate in the development and marketing of Windows Phone.

Andy Lees, president of Microsoft Corporation (NASDAQ:MSFT)’s Windows Phone Division, said that, “Microsoft Corporation and Samsung see the opportunity for dramatic growth in Windows Phone and we’re investing to make that a reality. The deal with the South Korean electronics titan provides broad coverage for each company’s products”.

Though Google has out rightly denied any accusations that Android breaches Microsoft’s patents, it’s had little success as Microsoft continues to threaten Android OEMs with all its might. While companies such as HTC, Samsung and Itronix have surrendered to Microsoft, others such as Barnes & Noble are continuing its legal fight over Microsoft’s claim from earlier this year that the Android-based Nook e-reader violates Microsoft patents. On the other hand, Google gobbled up Motorola’s mobile unit for $12.5 billion in August to acquire an established brand, a veritable treasure trove of patents, a way of better protecting Android, and a seemingly endless docket of patent litigation.

As I’ve mentioned in one of my earlier posts, though I hate Microsoft products and always have, I have to admit that the Windows giant knows how to make money, even out of its competitors. While WP7 is still testing the waters, there’s no doubt that Microsoft is making more money off Android than its own Windows Phone OS.

Goldman Sachs estimates that Microsoft gets nearly $3-$6 per Android device sold. While that doesn’t sound a lot of money, one needs to consider the fact that Android has a massive advantage when it comes to the volume game. Industry watcher Nielsen reports that 43% of American smartphone subscribers use Android-based devices and as many as 56% of users who reported buying a new smartphone in the past three months said they got an Android device.

Clearly, Microsoft seems to have the upper hand against Google in the Android patent battlefield. First, it’s making a fortune out of Android OEM’s misery and secondly, it’s ensuring that Android phones cost more, thereby creating a passive cost advantage for Windows Phone 7.

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Written by: Gaurav Kheterpal. www.digitcom.ca. Follow TheTelecomBlog.comby: RSS,TwitterFacebook, or YouTube.

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