Microsoft earns billions from Android, so why do they feel ‘Scroogled’?

May 1, 2013

Microsoft-Logo 600px Credit: James M Phelps, Jr / Shutterstock.com

The realm of mobile technology has a lot of nuance. Whether it’s HTC trying to rebuild their brand, Huawei leaving the US market, or Samsung continuing to steamroll the world, we always have something interesting going on. Part of that discussion is patent technology, and how it affects the changing landscape.

Often ambiguous, the amount earned per device for licensed patents is still interesting. We’ve seen some court cases, but those are often for past damages. We never see the out-of-court decisions, or other closed-door deals that are negotiated.

Not unusual, but still curious, are analyst estimates of just how much these patent licences earn. Speculation is often wild, though never proven. If we take a look at Microsoft, and their licensing agreements with the various Android OEM’s, the patent situation becomes muddled… but still fascinating.

Some analysts estimate Microsoft makes an average of $1 for each device, while others cite ‘sources’ who point to $8/device as a solid number. Those sources are equally mysterious to the numbers they spew forth, meaning this is still a game of intrigue. Recent reports are no different, and like the rest, based on a very educated estimate of alleged fact.

A recent projection by tech analyst Gartner suggests Microsoft could earn $8.8 billion from Android licenses by 2017. Of course, this is all based on roundly speculative earnings. This number of $8.8 billion is assuming Microsoft earns an average of $1 per device in royalties. If that number were $8 per device, Microsoft stands to earn $3.4 billion in 2013 alone.

microsoft Credit: Voxpelli/Flickr

Scroogled

Again, these estimates are mired in anonymous hearsay and innuendo. If they are accurate, so much more about the mobile technology space starts to erode. If Microsoft, which has a stranglehold on the PC market is actually doing so well from Android licensing, why take such an aggressive approach against it?

The PC

With steady declines in computer sales annually, it may represent a loss for Microsoft. Device sales can be directly linked to new MS Office licenses, or other software purchases. Microsoft also earns a royalty from each Windows PC sold.

So, why is the PC not selling? With other devices occupying our time, and an increasing move to mobile, we just don’t use them as much. A laptop is a great, low-profile solution… but they’re hardly mobile. An uptick in phone and tablet sales cannibalize PC sales, which fell 14 percent last quarter alone.

The PC has also become more reliable, for a longer time. The rapid growth in processor speed and need for memory has given us low cost PCs that last for years. Compound that reliability with lower use and other devices, then it only further complicates sales of the PC.

Android versus Windows

Android

Even if the estimates are accurate, and Microsoft actually makes $4-8 per device, they clearly feel they can do better with their own OS. Windows 8 is meant to be the first true cross-platform operating system for Microsoft. It missed the mark for many of us, but is still a really good first step. Sales of PCs are slow, and the expensive Surface tablet continues to sputter. Windows Phone is a niche device right now, but Microsoft has bigger plans for all three markets. It seems as though they fully understand the ground they’re losing is not easy to find again.

If Microsoft can leverage Windows 8 against the user, it could persuade us into upgrading our tech. It could also bring customers back to Microsoft. The declining PC market, a very small share of the mobile market, and no mobile platform to speak of cost Microsoft valuable time. Now that the customer has gone elsewhere, and invested in a new ecosystem, Microsoft has to battle to earn them back.

Those Android patent licenses are solid ground in which to stand and fight. Nobody can petition a court to revisit a decision with no new evidence, and waging war against Google or Android is not anti-competitive. Android is also massively successful, so the flow of income from those licenses isn’t going to erode like Microsoft’s market share and sales have.

Conclusion

It’s about money, and Microsoft wants as much as they can cobble together. Their methodology for doing so may be questionable, but their motive is sound. To lob hand grenades against the very platform that earns you so much in royalties seems ludicrous, but Microsoft has nothing to lose. Literally.

 

Comments

  • Booday

    Did you just say a laptop isn’t mobile?

    • MasterMuffin

      Technically it is, but I personally don’t count laptop as mobile either

    • Ugo Marceau

      It’d probably be more correct to say it isn’t AS mobile. Compared to tablets or phones which can do so many things as well as a PC.

    • Josh Fischer

      A laptop is mobile compared to a desktop, but not many people carry them at all times like people do with mobile phones and to a lesser extent tablets.

    • Magnetic1

      People say portable laptop and mobile phones.
      But a lot of people say thing they don’t always mean.

  • CharlesKGim

    At the end of the day, as usual, Microsoft is lying. Some of the licenses they have with these companies are cross licenses and they market them as though they are Android licenses. Anyone, who believes Microsoft is making billions off of Android AND trying to stop Android needs to have their head examined.

  • CharlesKGim

    At the end of the day, as usual, Microsoft is lying. Some of the licenses they have with these companies are cross licenses and they market them as though they are Android licenses. Anyone, who believes Microsoft is making billions off of Android AND trying to stop Android needs to have their head examined.

  • Will Stewart

    Microsoft makes billions from Android…which is then wasted on Bing, Surface and Nokia.

    • edgard

      they shouldn’t waste it.
      all those fail.

      M$ should make a good Halo games on WP instead of wasting time & money attacking Android..

  • Marvin Nakajima

    I had to set up solitaire on my Dad’s new Win8 laptop.. Seems they kicked out all those game apps from the OS install. In its place you have to now create a free MS online account and then an XBox gamer account which then allows you to download and install the free win8 Solitaire and Minesweeper apps. If that level of integration is true across the rest of the Application environment the tie-in between Win8 devices and Xbox will probably help MS at least stop further acceleration in loss of mindshare.

  • http://profiles.google.com/gbatmarx greg batmarx

    Microsoft: the most disgusting tech company that is even worse than apple. Promoting crappy closed source OSes that you are not allowed to own or share while trying to destroy (or profiting from!) opensource Oses that are better in every sense…

  • APai

    “Their methodology for doing so may be questionable”
    it has always been their business model. not just questionable tactics, caught red handed using illegal tactics.

  • SilverChariot

    Reason is simple.

    Case 1:
    You give a gold bar to me saying its all free but instead you place a hidden camera in the gold bar place it at my home, sell all personal data for cash, without even telling me. I suddenly feel scroogled !!!!

    Case 2:
    You steal gold bar from my home rebrand it as premium gold bar and sell, I have the right for some part of that money. That is this earning from Android. That doesn’t mean I was not scroogled in case one.

    It was as simple as that :D hope you agree !!!!