Android is turning out to be an extremely lucrative proposition, ironically, not for Google but for Microsoft.
I have not dived into the Google’s last 10-Q filing, but I would surprised if they are making any serious money from Android business. The OS itself is distributed free of cost to the handset maker. The way Google could potentially make money is through App sales and advertising. Google could expand mobile advertising without expending tremendous resources on a mobile OS platform that is distributed free of cost. Moreover, Android is not necessarily locked into Google’s marketplace. Recently Amazon had launched a competing Android apps store.
But how does Microsoft make money from Android?
Android apparently violates several mobile patents held by Microsoft. Since Android is open sourced and distributed for free, Microsoft has chosen to pursue the handset makers in litigation battles. The first major handset maker to succumb to pressure from Microsoft was HTC. Now it seems, others will follow soon – starting with General Dynamics Itronix.
Microsoft Corp. and General Dynamics Itronix have signed a patent agreement that provides broad coverage under Microsoft’s patent portfolio for General Dynamics Itronix devices running the Android platform. Although the contents of the agreement have not been disclosed, the parties indicate that Microsoft will receive royalties from General Dynamics Itronix under the agreement.
“We are pleased to have reached this agreement with General Dynamics Itronix, which is an example of how industry leaders address intellectual property,” said Horacio Gutierrez, corporate vice president and deputy general counsel of Intellectual Property and Licensing at Microsoft.
According to some reports, HTC pays $5 for every handset sold to Microsoft. Not sure how much General Dynamics Itronix will pay.
Update June 29, 2011:
Well, Android is throwing more money at Microsoft. Here is the latest:
Microsoft Corp. and Velocity Micro, Inc., have signed a patent agreement that provides broad coverage under Microsoft’s patent portfolio for Velocity Micro Inc. Android-based devices, including Velocity Micro, Inc.’s Cruz™ Tablet. Although the contents of the agreement have not been disclosed, the parties indicate that Microsoft will receive royalties from Velocity Micro, Inc., under the agreement.