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According to sources HTC is paying Microsoft almost $5 for most Android handset that it ships. This money is coming to Microsoft in lieu of the patent settlement agreement that it has entered with the Taiwanese handset maker. Apparently Androids dominance of the smartphone market is working out in Microsofts favour. Large sums are flowing into Microsofts coffers. As the company has acquired a sizeable arsenal of patents over the last few years, it is easy for it to launch patent infringement lawsuits.
1n 2007, CEO Steve Ballmer had called Android open source operating system a cancer, which violated 235 Microsoft patents. But now it seems as if Microsoft is making more from Android than it makes from Windows Mobile. The company has not declared how much it charges for the licensing of Windows Mobile, but most analysts believe it to be in the range of $5 to $10. Currently Microsoft is demanding $15 from Samsung for every Android handset sold. Samsung is in need for patent protection as it is embroiled in a bitter lawsuit with Apple.
If the deal of $15 per handset gets signed with Samsung, then this could be the highest royalty that Microsoft has ever received in the handset space. The company is not known to charge $15 per handset even for the licensing of Windows Mobile. Microsoft has already entered into a deal with LG; and it has started talks with Motorola for royalty payments for Android handsets.
The fact that Microsoft is able to pressurise handset makers into paying royalty for Android handsets must come as a big blow to Google. The big money that Microsoft makes on Android can be invested in further development of Windows Mobile. When seen from the point of view of handset makers, Android losses charm. If they are going to pay Microsoft a royalty whether they use Android of Windows Mobile, then why should they go in for open source software? Why not stick to Windows Mobile!
It is clear that Microsoft is following a highly intricate strategy for enhancing its revenues and promoting its Windows Mobile system. The company hits handset makers with patent licensing fees for Android, and at the same time it offers Windows Phones as a way of diversifying at no significant extra cost. Basically makers like HTC, Samsung, LG, Motorola and others can use Windows Mobile at the same price at which they get Android.
However, the strategy can only work when users actually start buying phones with Windows Mobile. For that Microsoft needs to do lot more work on the OS. It needs to get developers working on developing as many apps as are available for Android and iOS platform.
The fault essentially lies with Google, which has done very little development work to defend its OS in the mobile space. Like Microsoft, Oracle and Apple are also suing the makers of Android handsets. All these lawsuits and the settlements that follow eat into the margins of the handset makers and this makes them look for alternatives like Windows Mobile. Currently Microsoft does not have compelling software that it can put on tablets, once that happens, the war of the OS is going to really intensify.
Microsoft had partnered Apple and RIM in buying Nortels patents at a huge cost of $4.5 billion. These patents will allow the company to flex even more muscle in the mobile OS space. By flaunting these new patents, the company will be able to squeeze higher margins from Android makers and that could create further problems for Google.
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