Android Royalties Are Going to … Microsoft?

Mr. Softy is putting some patented pressure on the Android community.

In a series of press releases over the past week, Microsoft (Nasdaq: MSFT  ) has touted patent agreements with a variety of small bodies in the Android universe. The contract partners range from privately held PC and tablet designer Velocity Micro to Japanese audio expert Onkyo and a division of defense contractor General Dynamics (NYSE: GD  ) .

The announcements were made with hard-to-hide glee: "We are pleased to have reached this agreement with General Dynamics Itronix, which is an example of how industry leaders address intellectual property," says deputy general counsel Horacio Gutierrez in one of them, for example.

Microsoft is also part of the consortium that won the auction for a bundle of Nortel technology patents, alongside such unlikely allies as Apple (Nasdaq: AAPL  ) , Research In Motion (Nasdaq: RIMM  ) , and EMC (NYSE: EMC  ) . Taken together, the rash of license agreements and the heavier patent arsenal in the wireless arena form a potent platform from which Microsoft can launch a licensing campaign among larger Android partners, from Motorola Mobility (NYSE: MMI  ) to Google (Nasdaq: GOOG  ) itself.

The Android software doesn't come with licensing fees to Google or anyone else, but Microsoft might be able to collect royalties directly from handset and tablet makers instead and then trumpet that Android really isn't all that free. Although unlikely to boost business for Microsoft's Windows Phone platform, at least Redmond gets to take part in Android's proven success story. When you consider that HTC is reportedly paying Microsoft $5 per Android phone and that there are 500,000 Android activations per day, far-reaching licensing fees could quickly add up to be a surprising contributor to Microsoft’s bottom line.

How far will Microsoft stick its fingers into the Android pie? Add Microsoft and Google to your Foolish watchlist, and then sit down with a bag of popcorn to watch the news and analysis flow in. Both tech giants also look temptingly cheap these days, giving you all the more reason to keep a close watch on 'em.

Fool contributor Anders Bylund owns shares of Google, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Google, Microsoft, Apple, EMC, and General Dynamics. Motley Fool newsletter services have recommended buying shares of Apple, Google, and Microsoft. Our newsletters have also recommended creating a bull call spread position in Apple and a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 02, 2011, at 11:28 AM, ConstableOdo wrote:

    And despite Android's crappy business model, Wall Street's love goes to Google by claiming that iOS doesn't have much of a chance of beating the open and supposedly "free use" Android model. What a bunch of putzes on WS.

  • Report this Comment On July 02, 2011, at 12:36 PM, techy46 wrote:

    Microsoft gets $5 for each Google's Android device and I wonder how much Oracle's going to get for Android considering it violates the Sun Java IP which Oracle now owns. Socialism, even in patents and software, usually backfires. Building a revenue model on searching everyone elses content is the ultimate scam anyway. I'd love to see Apple, Microsoft and Oracle nail Google to the wall.

  • Report this Comment On July 03, 2011, at 12:05 AM, wck59 wrote:

    If anything this week shows that Google doesn't take IP seriously. The Nortel patents would helped defend Android and probably pushed Microsoft back. Instead Microsoft wins by being in the winning group headed by Apple. The handwriting is on the wall for Android, probably a few years down road Android might be making RIM look like a success.

  • Report this Comment On July 09, 2011, at 7:40 PM, addikt06 wrote:

    InfoThatHelp,

    You must be high, RIM is doing exceptionally well in all markets except NA

    And Playbook, is the second best selling tablet behind iPad

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