Under CEO Satya Nadella Microsoft (NASDAQ:MSFT) has been increasingly willing to take the fight to its rivals.
The company has specifically pushed back against Google (NASDAQ:GOOG) (NASDAQ:GOOGL) which stole significant market share from Microsoft's Windows operating system with its Android tablets and laptops running the Chrome OS. The previous Microsoft regime, led by CEO Steve Ballmer was slow to respond to these threats, but Nadella has been anything but.
In his first year on the job Nadella pushed back against Android by enticing Microsoft's OEM partners to offer sub-$100 Windows 8 tablets and sub-$200 Windows 8 Chromebook alternative laptops. Now, the aggressive CEO is taking the fight to his rival by investing in a company that is building a version of the Android operating system which would not be controlled by Google.
What is happening
Microsoft is reportedly set to be part of a $70 million investment round in Cyanogen, a company which makes a customized version of the Android operating system, The Wall Street Journal reported. An unnamed source told the paper that "the financing round could grow with other strategic investors that have expressed interest in Cyanogen because they're also eager to diminish Google's control over Android."
What is Cyanogen doing?
Cyanogen CEO Kirt McMaster has spoken about his desire to "take Android away from Google," according to ZDNet. He has been critical of both Google and Apple (NASDAQ:AAPL) for using their operating systems to force their services, apps, and products on users.
Apple, of course, does not license its operating system. Google gives Android away for free but requires its OEM partners to include Gmail, YouTube, the Google Play store, and other Google-owned services as a requirement of using the OS.
But, Google has made Android open source meaning that any company can take the base code and create its own version. Amazon has done this for its Kindle tablets. Those devices use a custom version of Android and they do not come pre-installed with Google's product suite.
Why does Microsoft want this?
Though Microsoft has declined to comment on the possible investment, it likely wants a stake in Cyanogen so the company, if it succeeds in winning significant market share, will install the Windows-marker's apps on devices running the modified OS. Nadella has invested heavily in the Android version of Office, but the Google-approved version of Android comes pre-installed with its suite of Office knockoff apps.
In addition, Microsoft could use a relationship with Cyanogen to push its Bing search engine, its upcoming "Spartan" browser, and its MSN news, sports, and finance apps. Investing in Cyanogen is a hedge for Nadella -- one that accepts that Windows 10 may capture a portion of the mobile audience, but Android will remain dominant along with iOS.
Cyanogen will give Microsoft a window into the Android world and open up its products to a much larger audience.
Is this needed?
Andreessen Horowitz partner and Cyanogen board member Peter Levine recently posted a piece on his company's website which said that the current environment does not allow companies to experiment "without going through the interests and lenses of the two dominant players — Apple and Google."
He believes that Cyanogen's efforts are needed to spur innovation.
"An open, leading OS contender, however, would empower the best third party developers -- through special APIs and tools that better integrate with the operating system -- to do more than what they're currently allowed to in a closed ecosystem (where they have limited, if any, tools and access to communicate with other apps)," he wrote.
Will it work?
In addition to Amazon using a customized version of Android, alternate versions of the OS have popped up elsewhere. In China, for example, Google has struggled to gain traction and alternate version of its OS flourish, The Journal reported. In total, the paper said, 37% of Android shipments worldwide in the third quarter were not the Google version, according to Strategy Analytics.
There is clearly a demand for an alternative to the Google-controlled version of Android and Cyanogen has a chance to fill this niche. Even if Microsoft funds the entire $70 million round itself, that seems a tiny price to pay to both gain customers and hurt a rival.