While it's still struggling to make inroads into the league of leading smartphone platforms with Windows Phone, Microsoft is earning good money through rival platform Android, if a new report is to be believed.
According to a new note by Rick Sherlund, an analyst with the firm Nomura, Microsoft is generating $2 billion per year in revenue from Android patent royalties, as
noted by Business Insider.
The analyst believes that the Android revenue has a 95 percent margin, a large chunk of the profit. He adds that the money helps in masking the cash Microsoft is burning on Xbox and Windows Phone products as the company reports the Android royalty payments under revenue and operating losses of Entertainment and Devices segment (that includes Xbox and Windows Phone). If the Android royalty is removed from the particular segment, it would reflect losses on account of Xbox, Skype and Windows Phone.
It's worth pointing out that Microsoft has signed patent deals with Android OEMS like LG, Samsung, HTC, and Acer for their Android and Chrome OS based products. Vendors who sign deals with the Redmond giant pay an undisclosed licensing fee for using its patents, as Android and Chrome OS allegedly infringe on them.
According to Microsoft, 80 percent of Android smartphones sold in the US and most devices sold throughout the world are now covered under its various agreements.
Some estimates
suggest that Microsoft could be earning anywhere between $1 to $8 per Android device. According to Gartner, Microsoft could generate about $430 million in 2013 from these royalties. But this would be a conservative estimate compared to the analyst's prediction. So, the $6-$8 toll per device looks more like it even if half of all Android devices shipped are included.