Samsung to Pay Microsoft Royalties for All Android Phones It Sells

Samsung logoYou won't hear Steve Ballmer say "I love this DEAL!" but Samsung's agreement to pay licensing fees is a big win.

"Under my thumb

The girl who once had me down

Under my thumb

The girl who once pushed me around."

--Mick Jagger and Keith Richards of The Rolling Stones, 1966

The iconic track by The Rolling Stones comes to mind as news of Microsoft Corp.'s (MSFT) new licensing deal with Samsung broke today. After all, Samsung is top seller of smart phones powered by Google Inc.'s (GOOG) Android OS, which quite literally has Microsoft's Windows Phone 7 smart phone OS down in sales.

But as much as Android has pushed Microsoft around in the market, Microsoft now has Android exact where it wants it -- under its thumb. It announced today that after negotiations, Samsung had agreed to enter an intellectual-property cross-licensing agreement.

The old saying goes "you'll attract more flies with honey than vinegar". While Microsoft's licensing pressure might not seem so sweet to some, it's at least a gentler approach than Apple, which has sued the top three Android manufacturers (Samsung, HTC, and recent Google acquisition Motorola) seeking to ban their handsets sales with nary a mention of a licensing settlement.

Indeed Microsoft's approach won over HTC, who was facing a lawsuit from Apple at the time, and now has won over Samsung, the fastest growing handset maker on the market, and the top maker of Android smart phones.

Reportedly the HTC deal was worth $10 USD per handset sold. For the Samsung deal Microsoft reportedly offered a $15 USD per handset fee, while Samsung countered with a $10 USD per handset fee. It seems likely that the pair met in the middle with a $12-13 fee.

Samsung and HTC both make Windows Phone 7 handsets, though, those devices haven't sold anywhere near the number of units as their flagship Android devices.

Of Android's "big three", only Google subsidiary Motorola remains without a licensing deal for Microsoft's intellectual property. The Wall Street Journal is reporting that Microsoft used the announcement as a chance to issue a request/threat to Google/Motorola pressuring it to license.

For Google the situation could be worse. It still will likely be able to turn a profit on its handsets and it will be free to focus on Android's other legal foes like Oracle (who is suing Google for Android's use of Java) and Apple. But it's also not a very pleasant situation as Microsoft's licensing fees tack between $10 and $15 in additional costs onto each handset sold. Those costs make Google's platform less attractive and competitive offerings more attractive.

Microsoft's Windows Phone Division President, Andy Lees, gushed about the deal, commenting, "Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone and we’re investing to make that a reality. Microsoft believes in a model where all our partners can grow and profit based on our platform."

And Samsung tried to spin the news enthusiastically, with Samsung mobile devices global marketing VP Dr. Won-Pyo Hong remarking, "Through the cross-licensing of our respective patent portfolios, Samsung and Microsoft can continue to bring the latest innovations to the mobile industry. We are pleased to build upon our long history of working together to open a new chapter of collaboration beginning with our Windows Phone "Mango" launch this fall."

However, make no mistake, Microsoft is the winner here, and at the end of the day Google, and to a lesser extent, Samsung, are the losers. Sure Microsoft would love Windows Phone 7 to be the kind of ringing success it thus far hasn't been. That would give it all sorts of auxiliary revenue streams -- say from data mining and app sales. But at the end of the day Android succeeding is almost as valuable to Microsoft, as it will get a sweet licensing cut of virtually every Android device sold -- without having to go to the hassle and expense of actually designing, advertising, and selling the product.

Source: DailyTech

Tags: Android, Microsoft, mobile phones, Samsung

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