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Does Android Make Microsoft More Money Than Windows Mobile?

Continued patent claims have many riding the Android gravytrain

Microsoft just announced yet another Android patent licensing deal, the tenth such deal they have announced with Android phone and tablet manufacturers. The latest to pay Microsoft for use of patents that Microsoft claims Android uses is Compal. a 28 billion dollar a year manufacturer of phones, computers and tablets.  Compal joins names such as Samsung and HTC in paying Microsoft to use Android.  In fact according to this article according to Goldman Sachs, Microsoft may realize almost a half a billion dollars from Android licensing fees.  That is more than they will make on Windows mobile phones!

With this latest signing Microsoft estimates that 50% of Android devices are now paying licensing fees to Redmond.  As can be seen from the bar graph below the number for the US market is over 50%. Any way you slice it, Microsoft has been very successful in a short time in recognizing revenue from Android. In fact maybe as successful as Google even.  The numbers being bandied about are that Microsoft gets about 5 dollars per phone with Android on it.  That adds up to some serious revenue. (graph courtesy of the technet blog, Microsoft on the issues)

The strategy by Microsoft is in stark contrast to the strategy pursued by Apple and Oracle. They are both in litigation around claims that Androis infringes on their patents.  Oracle is suing Google over its use of Java and Apple is suing Samsung, HTC and Motorola Mobility (owned by Google).  Microsoft has lawsuit or two itself against some who have not signed licensing deals, but overall has had much more success turning patents into licensing cash. The graphic below, also from the Microsoft on the Issues blog illustrates the differences in strategy between the three companies and some of the companies that use Android.

Also interesting is the the strategy of not suing Google directly (though suing Motorola Mobility is now like suing Google), but rather pursuing the hardware manufacturers who use Android.  It could be it is easier to pick on them and they are already use to paying for software licensing fees anyway. Google on the other hand is going to fight to the bitter end before they are going to give in.  In fact there was talk that Google would try to give the hardware makers some "hold harmless" type of arrangement where they would make good any claims upheld against Android.

In case you are wondering what kind of patents are being licensed, this article in arstechnica says  "examples include patents related to “implementing both long and short file names in the same file system,” a monitoring system that determines when to erase memory from flash memory devices, and patents related to managing contact databases and meeting requests."

The bottom line though is that sooner or later all of these claims are going to be settled or decided one way or the other.  Android has done a great job of jumping out and grabbing market share.  But with so many people lined up with their hands out alledging patent violations, how much can hardware makers afford to pay before Android becomes a too expensive open source solution.

What happens if it does become to burdensome or expensive to license?  Would handset makers instead turn to Windows 8?  I am sure Microsoft would not be too upset with that scenario.  For those who say you can't make money on open source, it seems like licensing is one way to skin that cat. The question is how much skin can Android afford before it becomes more trouble than it is worth.

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