Microsoft reportedly earns roughly $2 billion per year from Android patent fees

by: Andrew GrushNovember 7, 2013

As you may already know, over the last few years Microsoft has aggressively went after Android manufacturers, forcing them into patent agreements due to claims that Android violates the Redmond giant’s existing patents. Back in May we even reported that Gartner claimed Microsoft could be earning as much as $8.8 billion from Android patent licenses by 2017.

But how much does Microsoft really make from Android right now, and what do they do with the money that they earn? According to Nomura analyst Rick Sherlund, the number is right around $2 billion and allegedly all the money is used to conceal losses to its “entertainment and devices division”. This division covers products like Xbox, Skype and even Windows Phone. Most of the losses are supposedly related to the Xbox.

If you’re wondering how Sherlund reached his estimate, basically he took to the assumption that Microsoft makes around $5 per unit on each Android device sold, and that roughly 70 percent of Android devices sold are covered by an agreement.

Even if Sherlund’s numbers are guaranteed to be exact, it’s still safe to say that Microsoft's patent arrangements have proven reasonably profitable for the company.

He then looked at various estimates on how many Android devices were selling per year, and suggested that at least 90% of the money brought in from the patent arrangement turns out to be pure profit for Microsoft.

The end figure reached by the analyst is that Microsoft made $1.6 billion in the 2013 financial year and is set to make around $1.73 billion in the fiscal 2014 year.

Now it’s important to realize that this figure relies on a lot of assumptions and guesstimates. We don’t know for sure how much Microsoft actually makes per Android device. Most analysts suggest anywhere from $1 – $15, depending on who you ask.

The idea that Microsoft’s patent arrangements apply to 70% of Android devices is also something that we can’t say with complete certainty — though considering they have agreements with most of the top Android manufacturers across the globe, we wouldn’t be too surprised if that figure is close.

Even if Sherlund’s numbers are guaranteed to be exact, it’s still safe to say that Microsoft’s patent arrangements have proven reasonably profitable for the company. On the low end, we are talking about closer to a billion a year. If the estimates of $15 per device are true (which we doubt), we could be looking at a whole lot of cheddar.

Of course, even if Microsoft is profiting from Android, it’s also holding the company’s own mobile efforts back, which means that Android’s prosperity still hurts Microsoft more than in helps. The good news for Google is that Android’s grasp over the market is strong enough that even Microsoft’s leeching really doesn’t hurt Android in any major way.

What do you think of the estimate that Microsoft makes nearly $2 billion a year on Android? Do you think the numbers are correct — do they surprise you?

  • Nickan Fayyazi

    Could Microsoft be making more off of HTC than HTC is making off of themselves?

  • Shark Bait

    its a shame they make more money than google do directly, and their the ones who put in the hard work

    maybe google could make windows phone manufactures pay a licencing fee and they might make like $300!

    • Microsoftjunkie

      What hard work? Thwyre using MS ip’s. How is using someone’s elses tech, your own hard work? That’s why they’re paying MS.

      • Ian

        Um, the linux kernel is derived from linux and is open source, so unless you are one of those folks that thinks MS invented the operating system and all things to do with it, the main question lies in the gui, which is from scratch and probably much more of an issue with iOS. I realize that owning patents has nothing to do with technical merit or being the actual inventor, but MS does what it does great.

        But Android uses open source code at heart, and doesn’t even use FAT/NTFS any more. I’m guessing any patents they are “violating” have to do with MS owning “wifi” or some other generically insipid patent. I can’t find much specific via googling…

        Oh right, they managed to get Suse to cough up cache for an very old file system patent (as I recall). No disrespect intended to MS, but they are cashing in on Android via legalities, not any real damage suffered because of technical theft.

        • Microsoftjunkie

          I’m sorry, but there is too many articles about this matter that you obviously haven’t seen. So MS is stealing 2+ billion dollars? I’d not, how are they getting all this money from numerous android manufacturers? Proof is in MS wallet, they violate, they pay!

          • Nickan Fayyazi

            I like how your reply has nothing to do with the comment you replied to, since you have no facts to back up your claims. Silly Microsoft fanboys :)

          • Microsoftjunkie

            You need to learn comprehension. Oh yea, what you just accused me of, your comment did exactly that.

          • Matthew Wypyszinski

            the proof is in Microsoft wallet that 10 years ago they bought a company that bullied a companies that bullied some guy who invented some trivial piece of software that makes the blue light come on when you have a face book post or something dumb like that. they are making less than 10 per android phone, meaning that w/e was/is stolen is something small and nearly meaningless.

          • Microsoftjunkie

            What the hell are you talking about? Naybe you should “Google” this and see what MS has sued these companies for. I hope to God these companies aren’t stupid enough to pay for something that they’re “obviously” to you, aren’t infringing.

        • There is no such thing as free. Even linux has been found to violate Microsoft patents. The only difference here is Microsoft makes money from patents while Google makes use of ads.

          • APai

            the thing is they have never mentioned what patents linux is violating, because want to continually feed off linux. that’s exactly the definition of a patent troll. if they mention what it was – linux could change the offending code and cut off the patent protecton racket. what a bunch of sick loser corporation, no wonder we’d love to see them to die in a hurry

        • mcilloni

          >the linux kernel is derived from linux

          Linux is the name of the kernel, and consequently extended to name the systems (being that GNU, Android, anything) that has been put into. “Linux” is a kernel and nothing else.

          >Android […] doesn’t even use FAT/NTFS any more.

          Android is just a collections of programs and nothing else.
          The FileSystem issues and all the rest are all linked to the kernel; Android does not use NTFS in the same way GNU/Linux on the Desktop does not use it, because it is encumbered by all the royalities you can imagine and it’s also nothing special if compared to Ext4.

          The fact is that
          a. US software patents are the dumbest thing ever, and are absolutely a full stop to innovation (in EU per example you CAN’T patent algorithms and software – because they are ideas, procedures, not tangible products) and copyright is more than enough.
          b. Even if I write some kind of software (think about LAME) that violates some patent of some sort I am still not infringing anything until I distribute it in some sort usable binary form. Like selling projects for a gun is different than making it.

          So google or anyone FOSS is not sharing programs that can violate patents because they only give away sources, but you OEM in the exact moment you compile and start using those sources MUST have a valid patent licence for it even if you are not the developer of it.

          So every OEM must pay MS for its patents, while Google has not (except for Nexus builds that are probably already covered by OEM accords with MS). This is US law and this is crap.

  • Bigdik

    What are the figures google pays to Apple and vice versa

  • MadCowOnAStick

    So basically Microsoft makes more off Android than it’s own OS.

    • George Av

      ouch… that would fucking hurt!

  • john

    At the moment, microsoft can earn their living off the work they did a decade ago. What would happen in another decade or so?

    • APai

      I would love to see that happen. the last couple of decades they have dominated the consumer space & the corporate space. in one swift move, they lost the mobile space. i hope they don’t ever come up in that space. like ever. they should rot in hell for the excesses they committed in the last couple of decades

      • justsaying

        wow, man, you need some serious help

        • APai

          :) you’d appreciate it better if you had rooted for an underdog rather than a sick monopolistic corporation. or if you’d have contributed in some way to the open source community in some form.

  • APai

    patent protection racket

    I just hope their losses compound as we go forward, looks like its happening when they are tanking in multiple strategies. such predatory monopolistic companies need to go down in a hurry!

  • Luka Mlinar

    This whole patent thing is credulous.

  • yuse

    Microsoft deserves it think about it without msft Google would not even exist

  • Steffen Laursen

    Protection money.

  • Apple_Nexus

    But will fandroids realise that Microsoft is the biggest patent troll?

  • nishantsirohi123

    Perhaps Microsoft can now negotiate using this figure to enable Google services on Windows phone devices