In A new research note from Goldman Sachs indicates that Microsoft will generate $444 million in revenue from Android patent deals for fiscal year 2012 (started in July 1, 2011, ends June 30, 2012). According to Goldman, Microsoft is getting $3-$6 per Android device sold. Goldman has developed its estimates by taking into account Microsofts settlements with Samsung, HTC, and others. It also says the patent deals will add $0.04 in EPS annually for Microsoft.
However, other analysts are claiming that Goldman Sachs might have underestimated the amount of money Microsoft makes. When Samsung deal was in negotiations last year, royalty payments were reported as being around $10 per handset. This might seem like a lot of money, but for a behemoth like Microsoft, which made almost $70 billion in revenues last year, it is a proverbial drop in the ocean.
Microsoft has already ploughed in more than a billion into the development of its Windows 7 mobile OS. It is with the intention of expanding the base of its own Windows mobile OS that Microsoft is aggressively negotiating deals with Android handset makers. If settling with Microsoft means you get a discount on the Windows Phone licensing fee and Microsoft lawyers off your back, why not? This explains why HTC and Samsung are offering quite a few Windows phones.
According to IDC the shipments of devices with Windows Mobile OS will reach 4 percent this year, whereas Android will conquer 40 percent of the market share.
Manufacturers pay Microsoft $10-12 in licensing fees just to embed the Windows Phone platform, but according to Goldman, "we believe this licensing fee potentially could be negotiated if the handset manufacturer is willing to install and support Windows Phone on more devices."
"Despite the royalties Microsoft is demanding for alleged patent infringement, we see its legal battles as playing a lesser role in its overall mobile strategy as compared to its desire to strengthen the ecosystem for Windows Phone going forward," Goldman's analysts conclude.
The strategic partnership with Nokia has brought Microsoft twin advantages. The first is that through Nokia, Microsoft will be able to place many Windows powered phones into the market. The second advantage comes in the form of patent gains. According to Goldman, due to its Nokia deal, Microsoft has got the option of leveraging about 30,000 patents that are with Nokia. Most of these patents relate to radio technology standards. With so many new patents in its kitty, Microsoft has enough ammunition to send its legal eagles after the Android users.
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