Tuesday, 28 June 2011

Microsoft's biggest money earning mobile platform is Android

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"Microsoft’s patent arsenal is often its weapon of choice when it wants to turn the screws on its competition. And there has been perhaps no more famous example in recent months of this than its legal actions against Android vendors to force them to cough up per unit royalties to avoid the company’s legal wrath.

"At the rate that HTC is rumored to pay the company (between five and ten dollars per shipped unit), Microsoft is almost certainly profiting more off of the success of Android than it is from its own mobile line, Windows Phone 7.

"The latest domino to fall is a firm called General Dynamics Itronix, a maker of rugged computers and tablets. While the company’s computers run Windows, it does offer Android tablets. Microsoft and Itronix did not disclose the terms of the agreement, but made it plain that Itronix is paying Microsoft:"


Okay putting aside the disturbing fact that Microsoft is getting a cut out of Android via simply threatening to sue companies, is this a good move for Microsoft?

Well for share holders in Microsoft it means that the company is generating revenue despite failing to make any traction in mobile. So for the time being if Microsoft can't see its mobile platform at least it is making some money.

But assuming that Google can prove that Android does not violate any of Microsoft's copyrights this could be a very bad long term move by a firm desperate to deal with the pace of change mobile is bringing to the industry. If a future court decision rules against Microsoft it is unlikely that these revenues will last long. And given enough time Google should be able to change Android to remove any claim Microsoft might have.

The key thing to remember is that there is a difference between revenue and value. Revenue is bags of money. If you want to make a quick buck bag money is fine. This is not Microsoft's long term business. In Android Google is making the value and Microsoft is making some revenue, in time the fate of Microsoft's revenue is in the hands of Google, who is creating the value.

Microsoft desperately needs to get value out of mobile. Despite some rave reviews for Windows 7 mobile the platform has been a failure. Everyone is looking at the Nokia Microsoft phone coming out later this year, but neither Nokia nor Microsoft are coming to this from a position of strength. If the Nokia N series with Windows 7 does not get off to a stellar start it would be hard to see shareholders in Nokia not demanding a Android Nokia sometime early in the new year.

Microsoft has been able to weather failures on the PC platform before. Early Windows and Vista were major failures for the firm, but through raw determination and business, if not technical discipline the company was able to hold itself together long enough to win.

But Microsoft is facing something in Google's Android it has never faced before: a common distribution OS that is better than its own that any vendor can install. In the early battles with Apple Microsoft could count on its army of PC makers to produce a wide range of hardware that would undercut Apple time and time again. Apple's decision to sell a hardware-software package played right in to Microsoft's hands. Companies that wanted to enter the market generally had to work with Microsoft in order to take on Apple.

In Android Google has played Microsoft's own game. People are moving from Apple to Android just as they may have moved from the early Mac to Windows 95. Lawyers and agreements will not be able to change that. Microsoft may actually be in a time frame it is not familiar with. It may have had years to get Windows right, and years to make up for Vista. But in the mobile phone it may find that it slow deliberate pace can't keep up with the new age.

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