Post 26 - Microsoft signs fat Android patent deal

People are quick to dismiss Microsoft in the game of mobile devices. The Surface tablet got good reviews but isn't catching on as fast as expected, and Windows Phone still has a dismal 3% market share (although they're catching up and will probably soon overtake BlackBerry, which dropped from 6.4% to 5.2% between December and March).

However, it is easy to forget a huge part of Microsoft's strategy, which is patent licensing. Microsoft has an enormous patent portfolio, which it recently expanded even further by striking a patent deal with Chinese company ZTE, China's second-largest mobile phone manufacturer.

The recent article describing the deal:
http://blogs.computerworld.com/android/22103/microsoft-cleans-mobile-big-new-android-patent-deal

This deal is huge: it means that Microsoft now gets a profit share from patent licensing from the sale of 80% of all Android smartphones sold in the US. Additionally, Microsoft's patent licensing also affects the "majority" of Android smartphones sold worldwide. What does this amount to? In a single quarter, Microsoft received $792 million in patent royalties from Samsung and HTC in a single quarter.

These numbers are huge, and they have huge implications. They mean that Microsoft is getting huge revenues from the mobile phone market, even as Windows Phone stumbles. And in a theoretical scenario where iPhone popularity drops and Android and Windows Phone become the two leading smartphones, Microsoft's profit would be mind-boggling.

But a scenario like that is unlikely to happen any time soon.