The next time you buy an Android smartphone, there's a good chance that you'll fatten Microsoft's bottom line. Windows Phone may be struggling, but a new patent deal with the Chinese giant mobile manufacturer ZTE means that 80% of all Android smartphones in the U.S. and the majority worldwide are covered by Microsoft patent deals.
Yesterday Microsoft signed a patent deal with ZTE, China's second-largest manufacturer of mobile phone equipment, for ZTE devices that use the Android and Chrome operating systems. Horacio Gutierrez Microsoft Corporate Vice President & Deputy General Counsel, Legal & Corporate Affairs, announced the deal on a Microsoft blog. The deal comes shortly after Microsoft announced a similar deal with the Chinese manufacturing company Hon Hai, which is Foxconn's parent company.
As a result of both deals, Gutierrez wrote:
"...we have successfully entered into license agreements with nearly all companies on the list of the world's largest Android smartphone vendors and their manufacturers. In fact, 80 percent of Android smartphones sold in the U.S. and a majority of those sold worldwide are covered under agreements with Microsoft."
Microsoft didn't reveal the financial details of either deal, although it did say that in the Hon Hai agreement, it will receive royalties, so it won't be just a patent-sharing deal. Gutierrez's blog didn't say whether the ZTE agreement includes royalties, but a Microsoft spokesperson told ars technica that Microsoft's patent deals are "generally royalty-bearing."
Android patent deals bring in significant revenue to Microsoft, likely more than Microsoft gets from Windows Phone. In August, 2012 the analyst firm Trefis said that Microsoft received $792 million in patent royalties from Samsung and HTC in a single quarter. And in in October, 2011, Goldman Sachs estimated that Microsoft would get $444 million in Android licensing fees for for all of 2012.
Neither of those numbers can be verified. But since those estimates, Microsoft has signed many more Android patents, and Android sales have skyrocketed. So even though Windows Phone has only a 2.6% global market share according to IDC's most recent report, Microsoft is still getting significant mobile revenues.