Not all Android OEMs are created equal.
Just days ago, Apple (NASDAQ:AAPL) announced that it was making peace with Android original equipment manufacturer HTC in an uncharacteristically diplomatic approach to the smartphone wars. The two gadget makers have settled all outstanding lawsuits in a global settlement while agreeing to license patents to each other for the next decade. That's quite the opposite of the "thermonuclear" war that Steve Jobs was willing to commit to.
Investors have known for some time that Tim Cook was going to handle Apple's global patent wars differently. Who would be the next Android gadget maker to arrive at a cease-fire with the iPhone maker?
Not I, said the South Korean multinational electronics conglomerate
The most important Android that Apple continues to dance with is none other than its arch-frenemy Samsung. Following news of the HTC settlement, Samsung has specifically said the time for settling is gone. The Sammy exec responsible for the company's mobile and IT business, Shin Jong-Kyun, recently told Yonhap News Agency, " It may be true that HTC may have agreed to pay 300 billion won (US$276 million) to Apple, but we don't intend to (negotiate) at all."
Then again, this isn't particularly surprising. Remember that Apple and Samsung have been trying for years to settle the disputes to no avail. Earlier this year, U.S. District Court Judge Lucy Koh ordered the pair to at least try and play nice. Cook and Samsung CEO Gee-Sung Choi met up, stared each other down and arm wrestled, but alas, no settlement.
Apple went on to score a landslide victory against its frenemy a few months later, but that's just one of many battlegrounds. In the U.K., the Brits sided with Sammy, leading to some drama over Apple's court-ordered apology. This world war is spreading, with no peace in sight.
This is adding up
With HTC's settlement with Apple, that means the Taiwanese company is now paying royalties to both Apple and Microsoft (NASDAQ:MSFT) related to Android, estimated at $11 to $13 per unit combined. Microsoft has continuously grown its ranks of Android payers, and that also includes Samsung, who signed up last September.
If Apple were to continue scoring licensing settlements with Android OEMs, it's conceivable that it would make more money on Android than Google (NASDAQ:GOOGL) does. Google has never directly disclosed Android revenue, but it's been estimated in the ballpark of $2 per unit, based on some of its court filings in the Oracle (NASDAQ: ORCL) suit.
Microsoft has already scored Samsung as a primary hardware partner for Windows Phone 8, alongside HTC and Nokia (NYSE:NOK). With Samsung already paying Android-related royalties and Windows Phone licensing fees to Microsoft, who can blame the company for not wanting to start sending checks to Cupertino?
Samsung has much higher unit volumes than HTC, what with it being the No. 1 smartphone maker in the world and all. That means any licensing deal would cost Sammy much more than it's costing HTC, since royalties are paid on a per-unit basis.
Samsung's jump to the top of the smartphone market has been quite impressive. The company has now edged out Nokia as the largest mobile phone maker in the world (including feature phones). The Galaxy S3 outsold the iPhone 4S in the third quarter to become the world's best-selling model, although that was during Apple's transition quarter to the iPhone 5, which sold for less than 10 days during the quarter.
When it comes to smartphone strategy, Samsung and Apple couldn't be farther apart. Apple exemplifies product depth, releasing one new model per year. Samsung is the poster child for product breadth, offering 66 different Android smartphones featuring a plethora of different screen sizes (that strategy didn't work well for HTC).
Last year, Samsung set an internal corporate goal for 2012: "BEAT APPLE." Sammy's shotgun approach to see what sticks appears to be working, with the Galaxy S3 and Galaxy Note 2 in particular seeing success. With Samsung accomplishing its competitive mission, why settle?