Analyst claims Microsoft generates $444 million each year from Android patents

By Tom Warren, on 29th Sep 11 2:27 pm with 56 Comments

Microsoft will generate $444 million in revenue from Android patent deals according to Goldman Sachs.

Goldman claims that Microsoft’s lucrative Android patent deals will generate $444 million in revenue for the fiscal year 2012 (July 1, 2011 to June 30, 2012). Business Insider reports that Goldman’s estimates were revealed in an analyst note on Thursday. Goldman estimates that Microsoft receives $3-6 per Android device sold. The estimates follow similar reports that Microsoft receives $5 for every HTC device sold. Microsoft is widely believed to generate more revenue from Android patents than its own Windows Phone licences at present.

Microsoft announced on Wednesday that Samsung had signed an Android patent deal with the company to cover its use of Google’s operating system. The software giant will receive royalty payments for each Samsung smartphone and tablet that ships with the Google Android OS. Microsoft has managed to sign identical deals with six other Android manufacturers in the past three months and is currently involved in litigation with Motorola to force a similar deal. Microsoft has previously inked patent protection deals with Wistron, General Dynamics Itronix,Velocity Micro,Onkyo, Acer and Viewsonic.

Microsoft’s revenue for fiscal 2012 is estimated to be around $75 billion. If Goldman’s estimates are accurate then Microsoft’s $444 million from Android is a small part of its overall revenue.

Anonymous

sweet.. now if only MS will go on the offensive with innovation
- GP007
  
  They already are, Win8, WP7 have a good deal of innovation in them right now.
- Jinge
  
  And they have to keep going this way! Not doing the same thing they have done with IE6/XP. There is soo many fields to improve that they really can make the difference. Kinect is a great thing, but they still have to think bigger in home integration and capabilities, even if it won’t start right now to be used.
  Turning on a tv when you say it in the room you are, the computer being in another, would be really nice and would really have a WOOW effect!
  Managing alarms with windows, turning on the radio, …
  Opening the blinds 2 minutes before the alarm rings would be awesome!
- http://twitter.com/OldCongress Gamer
  
  Its already offensive enough, look at Ice Cream Sandwich by a lucky buyer yesterday.
  It totally sucks.
  
  http://www.phonearena.com/news/Possible-video-of-Ice-Cream-Sandwich-on-a-Nexus-S_id22507
- Guest
  
  OMG. This IIce Cream Sandwich is really awful. Good for Microsoft. There will be more room for Windows Phone 7.
- Jinge
  
  Why do you say it is awful? Maybe you don’t like it, but some people do. I don’t like Android, but I would never say it is shit, because it is not, and that one of the reasons of its success until now.
  Of course it is not the best which is possible to do, but saying it is awful… Please, be objective.
- Anonymous
  
  It looks like Google may have finally stopped copying. So that is why you will not see a lot of new features with Ice Cream Sandwich.
Anonymous

Now, they should take all this revenue and put it into Windows Phone.
- GP007
  
  It probably is I bet.
- Monkey D Black
  
  who remembered the proposed $500million for marketing? guess who’s paying for it?
- http://twitter.com/OldCongress Gamer
  
  You bet! haha
- Anonymous
  
  What do you think they’ve doing the last 12 months? The Windows Phone dev team is amazing!
http://profiles.google.com/elmsoftware John Lueders

I like that Microsoft profits from this. If Google did not play fair, then Microsoft should be rewarded. This will help balance the playing field a little. Ultimately, I do hope to see that Android phones cost a little bit more and that Windows Phones are compared more favorably in the eyes of the retailers of the world. Go Mango!
- Test1ngi23
  
  “Ultimately, I do hope to see that Android phones cost a little bit more”
  
  Wow. Only in WinRumors comments will you find people that actually believe that Microsoft trying to raise Android prices is somehow more honorable than Google trying to lower WP7 prices. So you’d rather see consumers lose than Microsoft lose? Amazing.
- Guest
  
  You don’t read very well, shill. Why am I not surprised?
- Mark
  
  Only on WinRumors will you find stupid trolls that for the past decade, under a variety of aliases, have been arguing that MS dumping products for free to extend their monopoly is anti-consumer and should be stopped/penalized in order to restore balance to the market, but then applaud when Google does the same thing.
- Test1ngi23
  
  Imagine if T-Mobile, AT&T, Verizon, Sprint, and Vodafone all gave you an iPhone 4/5 for free when you signed up for a new contract. Whether you wanted it or not, they just flat out gave you a free iPhone 4/5 and you couldn’t say no. You could still get another phone but you had to go out of your way to get it.
  
  Would WP7 and Android stay in business? Possibly.
  
  Would that be fair to WP7 or Android?
  
  That’s what the IE-Netscape issue is akin to.
- Anonymous
  
  @e150a27e646961d5594b4ac9b6bd58f3:disqus Except that IE is a feature that is useful for customers to have included. Microsoft got sued, but is there any OS(either desktop or phone) that ships now without a internet browser included? It isn’t going out of your way to download another browser. As we can see from the success of firefox and chrome, if people like the features of another product, people won’t use the integrated one. There are plenty of decent phones that are given away for free by the carriers. Doesn’t stop people from paying for other phones they like better.
- Test1ngi23
  
  @ymcpa:disqus “Except that IE is a feature that is useful for customers to have included.”
  
  And a free iPhone included in your plan wouldn’t be useful?
  
  “It isn’t going out of your way to download another browser”
  
  Yes it is. It’s definitely not hard for you and me but you’re still having to go to a site, download, and install a program. There are large portions of the general population who wouldn’t even know how to do this.
  
  I do agree with most of what you said though. I was just making the point that it wouldn’t be fair to the product’s competitors.
Anonymous

You have to see that 75 billion is the revenue not the net income… The net income is much much smaller. This 444 milion will all add100% to the net income since there is no expenses on this value. No salaries, etc to pay…
- Tom
  
  And several people pointed out exactly this in the comments to the Business Insider article.
  
  “Business” Insider, indeed. I’m convinced that 95% of business journalists have absolutely no idea that what actually matters to businesses is profits.
- Guest
  
  BI= SAI = anti-MS from day one.
- Guest
  
  Developing patents and protecting them is not free. There is a cost to get claim that income.
- Anonymous
  
  yes, its true…
- Anonymous
  
  But still it is “unplanned” revenue
- Guest
  
  I too, would like some “unplanned” revenue
- Anonymous
  
  Their net income for 2010 was $18 billion. So this will add 2% to net income. In addition, it won’t add 100% since you have to pay the lawyers. In all litigation, the only true winners are the lawyers, from either side.
- Guest
  
  Idle speculation since NI this year is expected to be higher than 2010 (but could always be lower), royalty revenue rate per unit is unknown (just speculated) and will be dependent on Android unit shipments, themselves a moving target. And of course no guarantee MS won’t plow it right back into expenses, either for WP marketing or generally, making the entire exercise moot.
http://twitter.com/laserfloyd Lewis McCrary

Milk Android and feed WP7. I like it.
http://www.facebook.com/Michiel.Papp Michiel Papp

This is why micosoft is winning without even trying :p

They don’t just throw crap on the market: they play it smart.

Mango is still better tough.
- Anonymous
  
  Exactly, they let the Smart phone and tablet market evolve and are now making their move with what seems to be the two best OS’s yet, Windows 8 and WP7.5. Unlike Google who just buy someone else’s work (Android) and try to copy the leader (iOS) Microsoft actually makes a product BETTER not just as good as. Android is only “Winning” because of their Massive selection of Phones. with the iPhone 5 on sprint, At&t&t and Verizon its only a matter of time before android starts to crawl back were it belongs. As the Linux of OS’s (note: i love linux for what is does, but there are better alternatives.)
Anonymous

The definition of good business – licensing. $444 million in added profit with little to no effort… Lovely.
- Emi Cyberschreiber
  
  yeah because Microsoft didn’t do any R&D or didn’t spend money to get patents others didn’t R&D as well…
  maybe, everything came when Microsoft popped a bubble, so it didnt cost anything… and then they have no rights licensing what they legally own or developed. rightttttt
- Guest
  
  The cost of invention for the patents in question has already been expensed years ago. The only incremental cost is that associated with securing these deals. And most of that is just time from MS’s already paid for in-house legal team.
- Anonymous
  
  Yes, it was expensed years ago. That doesn’t mean that they don’t want to get a return on the investment. His point is that the $444 million did involve quite a bit of effort and now they hope to profit from it.
- Anonymous
  
  Are you disagreeing with the premise that licensing is good business?
- Anonymous
  
  It’s a great gig if you can get it! Considering MSFT spends $70 billion a decade on R&D it’s very little ROI!
- Anonymous
  
  MS spends a lot on R&D, in so many different areas. We may never know how much R&D went in to the specific patents. More importantly, we still don’t know which patents are being licensed..
- Guest
  
  @ArrowSmith:disqus
  
  90% of that R&D is development which in turn created the products that have grown MS’s revenue threefold over that period. And the remaining part, research, has gone into many successful products, including recently Kinect. It’s also primarily responsible for the patents that now allow MS to drive $400 million plus of royalty revenue.
  
  Next time, get educated before commenting.
- Anonymous
  
  It’s a positive comment you dolt! How you can take a positive comment about good business practices and turn it into snipe fodder is beyond me!
  
  How about you try learning how to read before you snipe at people. Oh, and you might want to open a book on basic business practices and revenue streams. Licensing is one of many, and used by numerous corporations.
Anonymous

Where the heck do they get 444 million from? All the deals so far have been secret so Goldman has no way to know how much MS is getting. They most they could hope to estimate to would be one significant digit, like 500 million.
- Anonymous
  
  When you can see previous license deals, figure in known deliveries and calculate potential revenue, the 444 million figure is probably pretty easy to come up with.
  
  The irony of this all is last time i checked, the license fee for WP7 is cheaper than the royalty fees and google app fees for Android.
  
  Is it a dirty game MS is playing? yeah, in a way, but its a game every company in the world is held accountable to and every company in the world is playing – with the exception of Google. Google has a bone to pick and they only like to pick on MS.. Apple is holding a lot of patents and paying licenses as well, yet i don’t really see Apple chasing MS’s tail.
- Anonymous
  
  Alright, maybe I’ll concede an extra significant digit, so maybe 450 or 440 million. But I still think giving a three digit estimate is silly due to all the unknown variables. I guess the better question is why am I bitching about this.
- Guest
  
  Actually, Google is playing the dirtiest game of all. It’s called monopoly maintenance and it’s illegal.
- Jinge
  
  Don’t forget it is for 2012. It would mean 70 million of new android phones… Not sooo much.
Anonymous

If you think about it, this estimate is ‘low’ as it assumes that Microsoft is getting only ‘$3-$6 per Android handset sold; it’s possible that Microsoft could be getting more than those amounts. And, given that Android device sales may increase even more given that oem’s are flooding the market with them, as well as there’s still a missing Motorola ‘element’ that’s not being factored in, it’s safe to say that Microsoft could be close to recouping the initial expense (or investment, depending on how you want to look at it) for the Nokia deal.

I think that they should get at LG too, if they haven’t already.
- Anonymous
  
  I think you are right that the estimate of $3-6 is probably low. HTC is a very good partner with MS and always has been and they still have to pay $5, which makes me think that other players like Samsung would have to pay a lot more than $5. Weren’t the rumors that Samsung was trying to get MS to let them away with $10 as opposed to the $15 MS wanted?
Guest

Collecting royalties is nice, but let’s remember that those are substantial because Android is currently winning. That’s not a long term good thing for MS. And this incremental revenue will easily be eaten up in additional costs incurred to try and reverse WP7′s poor adoption (like the recently announced sales training for carrier retail reps). So don’t expect to see it hit the bottom line.

In other words, it’s a nice consolation prize for losing. But that’s all.
- http://twitter.com/oolong2 oolong2
  
  1. You’re forgetting that many of these deals include additional support for WP7. Microsoft doesn’t *need* this money they are using the patent deals as a business strategy to secure long term support for WP7. They are looking at the future not the present.
  
  2. The entire smartphone market is growing, so the idea that someone elses gains automatically means your loss is simply false…. The key is whether WP7 will grow above the rate of growth in the market. I don’t see this as a problem with Nokia, Samsung, and HTC all backing WP7 in 2012 along with the reception that Mango has recieved. WP7 has been out for less than a year. Android was no further at this point.
  
  3. Having half a billion dollars to use for advertising is no chump change…. There is no operating costs for this money except maybe to pay a few lawyers and accountants. So I imagine a large chunk of it will go directly into massive advertising campaigns for WP7.
- Guest
  
  1) I’m not forgetting that at all. Support for WP7 is of limited value until demonstrated otherwise. Many of these OEMs supposedly supported WP7 at launch. We saw what that was worth. Of course MS needs this money. It helps defray the billions they’ve spent on WP, which are currently detracting from EPS for a stock that hasn’t moved in a decade.
  
  2) And MS has lost share despite that. It’s now a niche player. That is undeniable. So yes, Android’s gains, along with iPhone’s, have come directly at MS expense, among others. They key isn’t just whether MS will grow above the market rate. First they’d have to grow at the market rate. Even that hasn’t be proved yet. This all comes down to Nokia now. Nokia does volume, MS has a chance. Nokia doesn’t do volume, WP is dead unless Android implodes under an avalanche of lawsuits suits and patent royalties (which MS is trying to accomplish, but unclear whether it will be enough to even arrest Android’s momentum far less reverse it).
  
  3) Having $400M to launch WP initially wasn’t chump change either. How did that work out?
- Anonymous
  
  The problem in 2010 was they launched a half-baked beta version of WP7 on only several mediocre devices. A recipe for low market share. Now with Mango and great devices coming out like the HTC Titan/Radar, Nokia Searay and so on WP7 is going to kill.
- http://twitter.com/oolong2 oolong2
  
  1. Sorry that’s just silly…. No business analyst would call wide spread industry support “limited value” It is undeniable value. and is a key indicator for predicting… anything.
  
  2. MS lost share with “Windows Mobile” not “Window Phone 7″, They are two entirely different platforms. and one could even argue entirely different markets.
  
  3. Like I said.. Where was Android a year after it’s release? People forget that these things happen on a curve not a straight line. Pretty much every new platform starts out slow then reaches it’s momentum somwhere down the line. Even the iPhone didn’t “take off” until after some price changes and an App Store.
  
  The whole idea that a new product has to sell like gangbusters in the first year is simply a myth for those preoccupied with blogs and the “flavor of the week” mentality. It does not reflect what actually happens in the real world.
- Guest
  
  @twitter-14086393:disqus
  
  1) Really? How many WP7 units have been sold with all that “support” so far?
  2) Lost share with WM? WM imploded. And so far WP7 pickup hasn’t been enough to even stem the overall decline for WM+WP
  3) Not far. The problem with that logic is that it’s now the dominant platform. OEMs who embraced it have done very well, selling far more units than they ever did with WM and appreciative that Google gave them a solution upon which to compete against iPhone when MS completely failed them. So expecting a similar result for WP is unrealistic. For one, Android really only had to compete against iPhone. MS now needs to compete against both a dominant Apple and an even more dominant Android, and convince the same OEMs shipping Android (outside of Nokia) to put any kind of real focus on WP. Totally different and harder challenge.
  
  Myth, huh? How did Kin do? Playbook? TouchPad? What happens in the real world, in this area, is that early winners now create ecosystems against which new entrants get compared to, found lacking, and written off as “not an Android or iPhone killer” before they can establish any kind of momentum. Even existing strong ecosystems are collapsing (think RIM, Nokia).
- http://twitter.com/oolong2 oolong2
  
  @Guest
  
  ” The problem with that logic is that it’s now the dominant platform”
  
  Like I said… “flavor of the week mentality”. Mobile phones don’t have the “lock in” that PCs have.
  
  I see Microsoft gaining partners and winning on innovation with Windows Phone and WIndows 8.
  
  I also see Google’s partner relationship weakening with the Motorolla acquisition. Which I beleive is the reason that Samsung started distancing themselves from Android (Focusing on Bada,Linux Tizen, and WP7). Google’s tablet strategy is also non-existent (lets copy iPad and see what happens)
  
  I also see Apple losing steam in 2012, because of their refusal to let OSX evolve and their over-reliance on iOS.
  
  Listing a bunch of products that have failed means nothing… I can also list a bunch of products that started out slow and then dominated. (Office, Xbox, Windows, Internet Explorer, etc.). Which is pretty much the history of every Microsoft product.
  
  Besides even I knew the Playbook was going to fail. I got to play with an early prototype and I told the person that showed it to me that it would fail. RIM has no direction anymore.
  
  Most people knew the Kin would fail without a cheap data plan. You can’t sell a feature phone at smartphone prices. The company Danger was behind the Kin, it was never part of Microsoft’s larger mobile strategy. Which is why they were quick to kill it.
iOS->wp

From memory apple licenses full active sync support for exchange from Microsoft as well.
- Guest
  
  Correct.