While Windows Phone 7 may be doing little to affect Microsoft's bottom line, Microsoft's significant patent holdings are allowing it to cash in on Android's success. In a research note to clients seen by Business Insider, analyst Walter Pritchard said the Redmond company receives US$5 for every HTC Android phone sold.
Those payments are part of a patent infringement settlement between the two companies, and it's probably the tip of the iceberg as Pritchard noted Android "appears to have very little [intellectual property] to defend itself with."
Pritchard reports that Microsoft issuing other Android device manufacturers and is asking up to $12.50 per device in licensing costs. Given that, Microsoft's profits from policing its intellectual property could very well skyrocket and become a bigger business than its own mobile phone ventures.
How much is Microsoft making? It's believed that HTC has shipped about 30 million Android devices. That means that just this manufacturer alone has made Microsoft some $150 million. Putting that in perspective: Windows Phone licenses are thought to run about $15 per device. With two million units sold, the Redmond company has made about $30 million on its work.
That's a wide disparity but it probably won't last. Remember that Nokia now plans to use Windows Phone in its smart devices, and the company has a strong position in the market already -- although mainly outside the US. Microsoft stands to make quite a bit in licensing fees there.
Microsoft's efforts may also carry a side benefit. Citigroup says that Android phones currently only enjoy 10 to 15 percent operating margins, and tablets a measly two to three percent. By making it more expensive for manufacturers to produce, Microsoft may be able to lure these developers to produce more devices on its platform since it is cheaper to make.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.