Preston Gralla

Microsoft's biggest mobile money-maker is Android, not Windows Phone 7

May 27, 2011 11:55 AM EDT
By Preston Gralla

Microsoft may be spending enormous amount of money and development effort on Windows Phone 7, but for now, it's making more money off of Android than it is from Windows Phone 7. So says Citi analyst Walter Pritchard in a just-released report.

Gizmodo says that according to Pritchard's report, Microsoft gets five times as much money from Android than it does from Windows Phone 7, because of a settlement in an intellectual property infringement case against HTC. The terms of the settlement call for HTC to pay $5 to Microsoft for every Android device HTC sells. Citi claims that HTC has sold 30 million Android smartphones, and so Microsoft has taken in $150 million so far as a result of the suit.

Gizmodo says that Microsoft has sold two million Windows Phone 7 licenses, at an estimated cost of $15 per license. That translates into $30 million --- one-fifth of what Microsoft has gotten so far from Android sales of HTC devices.

And that may be just the beginning. Microsoft has sued other makers of Android devices, and Citi estimates that after settlements, Microsoft will get between $7.50 and $12.50 per device.

Pritchard said that he expects Microsoft to file more suits against other Android makers. According to Business Insider, the effect of that may be more than just bringing Microsoft additional income --- it will also cut into the profit margins of Android device makers, which will help Microsoft in the long run as well.

So when it comes to mobile, for now it appears that Microsoft's profit is tied to its lawyers, not its designers and engineers. That may be good for the short term, but in the long run it's no business plan. If Android continues to bring in more money for Microsoft than Windows Phone 7, the company will have failed in mobile.