As ironic as it may seem but Microsoft is earning royalties from each Android device sold*.
Reportedly, the leading tech-giant has pocketed over $800 million worth of Android royalties in the second quarter itself. More paradoxical is the fact that these revenues generated from Android royalties surpasses it’s earnings from Windows Phone- its very own mobile operating system.
$792 million in 3 months is no petty amount, not even for a company which has reported earnings worth $18.06 billion in the fourth fiscal quarter of 2012 from its pervasive business operations. Conversely, Microsoft had also reported net losses worth $262 million in Entertainment & Devices division, which include the Xbox 360 and Windows Phone.
In case you’re wondering why on earth Google has to pay Microsoft royalty, hover over there to unravel the mystery of this conundrum. Microsoft convinced both the companies that it was somehow better for them to not fight years of battle by settling up a long-term agreement.
*Microsoft patents are applicable only to HTC and Samsung based Android smartphones. HTC pays Microsoft $10 per handset and Samsung pays $12 to $13 per handset. Microsoft had won the trial about a year ago in subject to patent infringement and each party (Samsung and HTC) had agreed on the proposed royalty structure. Samsung sold nearly 53 million smartphones in the 2nd quarter and HTC though made some despicable losses in the Q2, it sold a hefty number of handsets in the market. Gadgets like HTC One X and Desire were highly successful, thereby abating the colossal fiscal damage.
Owing to the huge success of Android, the Redmond software giant has actually fared well in the revenue earnings. Goldman Sachs had estimated that Microsoft would earn $444 million in Android licensing fees in whole of 2012, but the figures out in Trefis’ report are overwhelming. Alhough the reports mentions revenues worth $792 million, the royalty-earnings could be even more considering the fact this only encircles royalties received from two companies- HTC and Samsung.
Despite the fact that Microsoft’s Windows Phone is lagging way behind iOS and Android, Microsoft is having a merry time watching Android boost up in the smartphone arena. Windows Phone apparently posted a staggering growth rate of 277% in the second quarter, but it only meant it had been ported to 5.1 million units more. The number though humongous is nothing when compared to Android sales of 107.8 million in the same quarter.
Nevertheless, even with Android doing better than Windows Phone, it’s a win-win situation for Microsoft. For the first time, Microsoft is pocketing on something which they never developed and something which they should be ideally competing.
Microsoft can settle for billion dollars for now. They would come handy in conferring to the development costs of the upcoming Windows version- Windows 8.
Doesn’t matter if things don’t work out, Microsoft is sure not to lose out of one thing, for sure.