Calculations based on analyst's report suggest that Google's free mobile operating system is doing better for Microsoft than its own mobile OS. So, is it? (updated)
Who's making money out of Android? Some carriers (because people are buying smartphones), perhaps some handset makers, one or two app developers, and possibly Google through ancillary services such as search and maps.
Oh, and Microsoft. Very much Microsoft.
That's right: according to a briefing note from Walter Pritchard, an analyst at Citi, Microsoft is getting $5 per Android handset sold by HTC following a patent settlement over intellectual property infringement in April 2010 relating to Android. And continuing lawsuits by Microsoft against other handset makers are reportedly seeking between $7.50 and $12.50 per device sold using Android as well.
That could turn into a profitable sideline for Microsoft, since Android has the biggest share of the smartphone market. In fact Horace Dediu of Asymco calculated that based on 30m HTC Android devices shipped, at $5 each to Microsoft, that's $150m for Microsoft. Compare that to 2m Windows Phone licences at an estimated $15 per phone, that's around $30m. (I think the figure is slightly higher now - 2.3m to the end of the first quarter - but it doesn't shift the figure much.)
That's five times as much income from Android than from Windows Phone. If Microsoft can get the same sort of settlement from other Android handset makers, then the mobile phone business could turn into a good profit centre for it - because it gets this levy without having to do any work, not even software development. And that money is also available to be funnelled to Nokia, which is going to install Windows Phone. So HTC is helping out Nokia.
Now, I think it's important when we see stories like this to check them with the sources. So I put in a call to HTC to ask whether it agreed with the $5 estimate put forward by Pritchard. First reaction: "oh, that sounds far too high. I don't think we'd be paying that."
A few hours later, I got the official statement. Are you ready for it? Here it comes.
"Last year, HTC and Microsoft did announce a licensing agreement for Android handsets. Such agreements are not unusual in the wireless industry, and as is the case with all such agreements, HTC does not disclose financial terms."
HTC is in all likelihood completely banned from discussing the amounts of the settlement, because to do so would affect Microsoft's potential to win higher amounts in any future patent licensing agreements it wins from other handset makers. It's tempting to think that HTC hasn't confirmed the $5 figure because it's correct - but it could still be two or three times too high.
Yet even in that case, that still means that Microsoft has received far more money from Android licensing than from its own phones, so far.
Update: Matt Brian of TheNextWeb points us to an interesting report from Taiwan which suggests that the fee being paid is already around the $5 mark and that Microsoft wants to up it to that $7.50-$12.50 mark:
HTC confirmed yesterday (May 29) the increase of the licensing fee but refused to specify the amount.
And:
Jung Chueh-sheng, chief financial officer of HTC, noted that it's common for hi-tech firms to pay licensing fees, adding the company's gross margin stayed at the satisfactory level of 29-30% in the recent four quarters. He discounted the influence of the increased licensing fee, which will be offset by continuing expansion of the company's sales.
This merits a little bit of unpacking. Saying that the gross margin stayed at a particular level in the past doesn't mean anything, since this is talking about an increase in fees in the future. But he's clearly hopeful that lowered costs from selling more handsets will make up for the extra payments. If anyone knows quite how many more handsets you have to sell to offset that sort of extra cost, do pitch in.
So Microsoft is definitely going to do better, for now, from Android than from Windows Phone. (HTC, it should be noted, also makes Windows Phone 7 devices. So Microsoft wins both ways from it.)
Don't expect that to change much between now and October, when we expect the first Nokia "Nokindows" phone. And with HTC's success continuing, it might even become a large enough number to show up in HTC's accounts. We'll keep a look out. And in the meantime we'll savour the irony.
Source: http://www.guardian.co.uk/technology/blog/2011/may/31/microsoft-htc-licensing-response
AMERICA MOVIL AMKOR TECHNOLOGY AMPHENOL ANIXTER INTERNATIONAL APPLE COMPUTER
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