Microsoft flexed its muscles on Wednesday after revealing a significant Android patent deal with Samsung.
The software giant will receive royalty payments for each Samsung smartphone and tablet that ships with the Google Android operating system. The deal is significant for a variety of reasons. Microsoft signed a similar deal with HTC last year which is rumored to net the company $5 per Android HTC device. Samsung and HTC account for more than half of all Android phones sold in the U.S. over the past year. The latest deal means that Microsoft pockets a fee for every Samsung Android device sold. The company refuses to disclose the terms of the deal but if it’s similar to the HTC rumored price then it’s likely to be around $5 per device. Combined with HTC’s sales, this is an easy revenue stream for Microsoft.
Investors reacted to the news by trading Microsoft stock in the thousands on Wednesday morning. Microsoft’s stock price jumped 2% in early morning trading on the NASDAQ stock exchange shortly after the opening bell. Microsoft claims that its latest deal proves that “licensing works” in the patent world. “They show what can be achieved when companies sit down and address intellectual property issues in a responsible manner,” said Microsoft’s Brad Smith, General Counsel, in a blog post on Wednesday. Smith recognized that Google has complained in the past about the impact of patents on Android and software innovation. “To them, we say this: look at today’s announcement. If industry leaders such as Samsung and HTC can enter into these agreements, doesn’t this provide a clear path forward?” said Smith.
Microsoft’s Samsung deal isn’t the last of its kind. The company ” remains committed to entering into similar agreements with other handset manufacturers,” according to Smith. Microsoft has managed to sign deals with seven Android manufacturers in the past three months and is currently involved in litigation with Motorola. Microsoft filed a complaint with the International Trade Commission (ITC) recently, asking the ITC to block imports of some Motorola Android phones in the United States. The resolution could be a lengthy process due to Google’s recent acquisition of Motorola Mobility.
Google announced in August that it plans to acquire Motorola Mobility for $12.5 billion. Google CEO Larry Page noted at the time of the deal announcement that Microsoft and Apple are “banding together in anti-competitive patent attacks on Android.” Citing recent patent auctions, Page expects that Google’s acquisition will help protect Android in the future. A number of analysts believe Google’s deal could be beneficial to Microsoft’s Windows Phone, creating more competition between the three major smartphone operating systems.
Microsoft’s latest deal with Samsung will also prove beneficial to Windows Phone. The company revealed on Wednesday that Samsung and Microsoft will “cooperate in the development and marketing of Windows Phone.” Dr. Won-Pyo Hong, executive vice president of global product strategy at Samsung’s mobile communication division revealed that the collaboration will begin with Windows Phone 7.5 devices this fall. “We are pleased to build upon our long history of working together to open a new chapter of collaboration beginning with our Windows Phone “Mango” launch this fall,” said Hong. Samsung and Nokia’s Windows Phone 7.5 devices will likely prove popular over the upcoming holiday season. The launch of Windows Phone 7.5 “Mango” indicates that Microsoft is ready to fight competitively in the smartphone market. The backing of HTC, Samsung and Nokia will almost certainly propel Windows Phone into the top three mobile operating system in 2012.
Microsoft may have been down and out with Windows Mobile but the company is very much in the ring with Windows Phone, floating like a butterfly and stinging like a bee.