Microsoft makes more from Android than Windows on smartphones

Microsoft's mobile future looks rosy, and innovation has nothing to do with it -- Redmond raked in more in Q1 from Android fees than from Windows Mobile and WP7 combined

Over the weekend, Horace Dediu on the Asymco blog put some numbers together and estimated that Microsoft has made five times more income from Android than from Windows Phone.

I've sliced the numbers a bit differently and come to the conclusion that in the first quarter of this year, Microsoft's Android revenue probably exceeded all its Windows smartphone income. More startling, it looks like that topsy-turvy state of affairs is likely to continue for the foreseeable future.

Here's how the numbers work.

Gartner says that Microsoft operating systems appeared on 3.7 million smartphones sold in Q1 of 2011. The same report states, "Windows Phone saw only modest sales that reached 1.6 million units in the first quarter of 2011." Thus, the remaining 2.1 million Microsoft operating systems sold must be the (ancient) Windows Mobile -- versions 6 or 6.5.

Of course, Microsoft doesn't publish its licensing fees for Windows Mobile or Windows Phone, but a detailed scan of publicly posted information (which may or may not be accurate) hints at Windows Mobile licensing fees close to $8 and Windows Phone licenses at about $15. Using those figures, Microsoft made $16.8 million + $24 million for a total of $40.8 million from mobile phone licenses in the first quarter -- a surprising mixture of 60 percent of its revenue from the newer Windows Phone 7 OS and 40 percent from the two-year-old Windows Mobile 6.5 (or the three-year-old, gack, Windows Mobile 6.1).

In the first quarter, again according to Gartner, HTC sold 9.3 million units. Although HTC offered non-Android phones during the first quarter (including the Windows Phone 7 phones Mozart, Schubert, Gold, Spark, and Mondrian), Android-based units outsell all other HTC phones by a very substantial majority. HTC doesn't publish Android sales figures separately, as best as I can tell, but the number of HTC Android phones sold in the first quarter certainly fell between 7 and 9 million.

Reports from many sources credit Citi analyst Walter Pritchard as saying that HTC pays Microsoft $5 per Android phone sold as part of a patent settlement reached in April of last year. If that's the case, HTC paid Microsoft somewhere between $35 and $45 million in Q1 on patent fees alone.

Conclusion: Microsoft made as much from HTC's Android phones as it did from Windows phones in the first quarter of this year. That's current money, not old payments, accruals, or lifetime-to-date figures. Cash on the barrelhead.

Microsoft's mobile future looks rosy, and innovation has nothing to do with it. While Windows-based smartphone sales seem confined to the doldrums -- they'd plunge screaming off a cliff if it weren't for Windows Mobile 6.x sales -- Android sales are growing by leaps and bounds. HTC's unit sales have doubled in the past year. At $5 a pop, that's a cool $50 million a quarter and growing exponentially, just from HTC.

Microsoft's also gunning for all other Android phone manufacturers. HTC caved in a year ago and settled for $5 a handset, much to the chagrin of Google and Android handset manufacturers. Rumor has it that Microsoft applying the screws to all of the other major Android phone companies -- Samsung, LG, ZTE, Motorola, Huawei, Sony -- and the starting offer to call off the patent legal team is said to run $7.50 to $10 per phone.

Payola? Legal blackmail? Legitimate pursuit of Microsoft patents? Hard to say. The only thing we know for sure is that (a) Microsoft's going to make a bundle with phones, regardless of how Windows Phone 7, Mango, and Nokia turn out, and (b) there's never been a better time to be a patent attorney.

This story, "Microsoft makes more from Android than Windows on smartphones," was originally published at InfoWorld.com. Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest developments in business technology news, follow InfoWorld.com on Twitter.

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