Featured: Microsoft – Royalties vs Realities

| January 23, 2012 | Reply

Microsoft has been making a lot of news of late, what with all of the patent licensing deals that they’ve been striking with the Android OEM’s over the last several months. The latest such OEM being LG, but Microsoft has bagged most of the big ones.

Samsung, HTC, ASUS, Acer and LG along with lesser players like Huawei and Pantech have all capitulated and entered into patent licensing agreements with Microsoft. In fact, the LG deal is the 11th such patent arrangement for Microsoft. After the deal was announced, Microsoft VP and General Counsel Brad Smith boastfully tweeted:


I couldn’t help but laugh when one of the largest technology companies in the world tried to hijack the Occupy movement by co-opting their slogan. I can’t imagine that the Occupy people really give a fat damn, but quite a few of the 1% walk the halls in Redmond.

As funny as that was, it wasn’t the first tweet of the day from one of the Microsoft 1% boys. About an hour earlier Frank Shaw, VP of Communications had this to say, and he aimed it directly at Google:

But what is it exactly that Mr. Shaw is trying to “communicate” to Google and the Android world?

Dirty hands

Aside from Windows and Office, Microsoft isn’t known for their profitable business units. The Interactive Entertainment (Xbox) unit is so far underwater those losses will never be recouped. Online Services like Bing and Hotmail? Loser. Skype? Uh, yeah. Loser.

How about Windows Phone? I don’t give a damn what analysts are saying about Windows Phone in 2015, in the here and now Windows Phone share is declining. Loser

Microsoft’s lead hardware partner for Windows Phone didn’t come running to the party willing. They smelled the scent of money and Nokia dropped their own Symbian OS in favor of a $1 billion payday. I mean, they dropped Symbian for Windows Phone.

Stephen Elop, current Nokia CEO and former head of the Microsoft Business Division has made stupid comment after stupid negative comment about Android, while his own company’s Windows Phone effort has failed miserably. That would have been business as usual for Mr. Elop at Microsoft, but propping up failing business units to harm competition isn’t the type of dirty handed maneuver that Mr. Elop’s Nokia can afford to do alone. Enter Microsoft and their money pile.

Patent Royalties: Lies. Damn Lies
I’m more than a little skeptical of the notion that Samsung, HTC and LG are writing checks to Microsoft for every Android or Chromebook device that they make. Microsoft doesn’t WANT these OEM’s to make Windows Phone devices, they NEED these OEM’s to make Windows Phone devices. Microsoft would think nothing of another dirty handed trick to make it seem like they are suddenly winning, when all they are doing is rearranging the deck chairs on the MS Titanic.

Microsoft charges as much as $15 per license for every Windows Phone device sold. I’d find a much more plausible explanation of all the big OEM’s so easily and readily signing a patent licensing deal with MS is tied directly to a reduction in the cost of each Windows Phone license that they sell.

Samsung, HTC and LG all have Windows Phone devices in the market right now, and if allowing Microsoft to have a PR win by claiming that 70% of all Android devices are under Microsoft license means that they pay less money overall, everyone wins. The big Android OEM’s aren’t beholden to Google in any way, and signing these deals with Microsoft may actually be saving them money in the end.

Adding a little strength to my argument, the only big (ish) Android OEM to not do a licensing deal with Microsoft has been Motorola, a company that isn’t going to be doing a Windows Phone device. Also, Barnes & Noble and Amazon both told Microsoft to sit and spin on it’s patent pile, two more companies that have no interest in anything Microsoft.

Money, money, money, money
I think that Microsoft is taking shots at Google over these supposed patent royalty agreements because they buy into the notion that Android doesn’t make any money for Google. And it doesn’t directly. Goldman Sachs has estimated that Microsoft is going to get around $450 million a year in Android licensing fees. Oracle estimates that each day’s Android activations are worth about $10 million in annual revenue for Google, or roughly $3.5 billion. Which stack of money do you think Google would rather have?

Aside from that, Google couldn’t give two quick squirts about who pays Microsoft for what. Android exists to extend and strengthen Google’s relationship with it’s own users. That’s it. Android, even with it’s supposed licensing fees paid to Microsoft is likely far less expensive for the OEM’s than Windows Phone would be. And we won’t bring up how expensive (and impossible) it would be for any or all of these manufacturers to roll their own patent encumbered OS.

At least Microsoft is making money in mobile
Windows Phone isn’t making Microsoft a dime. In fact, it’s cost them north of a billion dollars. If these patent deals are actually paying Microsoft a few dollars, it’s the only money they are going to make in mobile this year.

Reality
And at the end of the day, the once mighty Microsoft, the former largest tech company in the world will be reduced to patent troll status.

And Google couldn’t care any less.

Leave a comment here, or send me a message on Twitter @arrowrand if you have thoughts on this patent troll mess.

Category: Android News

About Randy Arrowood ()

I'm a 40 something early adopter of all things technology. I was first in line to buy both my original Verizon Droid and my Apple iPad 1. I don't hate your phone or tablet choice, but I've probably got an opinion about it. Aside from my family, the only things that I love more than a new gadget are fly fishing and going to the ballpark. Ocassionaly I find a way to blog about both. Though I'm only one more Foxconn story away from being fired, I've been writing for Android Headlines since March 2011.