Microsoft (NSDQ: MSFT) and the device makers that have entered into patent licensing agreements with it over the Android platform have so far been mum on how much they are paying Microsoft in their settlements. But the analysts at Goldman Sachs have come out with their own estimate: in total, $444 million annually.
The research, reported today by Business Insider, says that theoriginal equipment manufacturers (OEMs) are paying Microsoft between $3-$6 per device. The Goldman Sachs analysts base the calculation on estimates for the number of Android-based devices that will be sold by Microsoft’s licensees between July 1, 2011 and June 30, 2012.
Those OEMs include HTC, Acer, General Dynamics Itronix, Onkyo, Velocity Micro, ViewSonic and Wistron, and Samsung, which yesterday became the ninth licensee. Motorola (NYSE: MMI), currently being acquired by Android’s parent, Google (NSDQ: GOOG), is the last remaining handset standout. Motorola is also involved in litigation with Microsoft at the moment.
As BI points out, a sum of $444 million is small potatoes for Microsoft, which analysts polled by Yahoo (NSDQ: YHOO) believe will make $74.5 billion in revenues this year. It will have an equally small impact on the company’s earnings per share, $0.04 on estimated EPS of $2.86.
Yet at least one person is questioning Goldman Sachs’ figures.
“Goldman Sachs’ estimate of Android patent royalties collected by MSFT is not serious analysis but more like reading tea leaves, at best,” said Florian Mueller, the writer behind the patent blog Foss Patents.
He noted that in the patent case that Microsoft has filed against Barnes & Nobel, also over an Android device, B&N claimed that Microsoft was demanding more for Android royalties than it was charging for a Windows Phone 7 license. That WP7 license fee, notes Horace Dediu at Asymco, is believed to be between $8 and $15 per device.
“Either GS is off base or B&N lies to the courts…Or both,” noted Mueller.
Earlier this year, it was reported that Microsoft was demanding significantly more than $3-6 per device in its patent claims. A report from Reuters quoted sources saying the figure was $15 and that Samsung would probably neotiate that down to $10 — still potentially more than twice the figure Goldmans has put on the royalty.
What to make of this situation? If these numbers are indeed comparable to what Microsoft is charging to license its own OS, it could be a sign that it’s not make much from that, either.
But even if the incoming revenue is small, if Microsoft can leverage those deals so that those handset makers are also entering into broader partnerships on WP7 — as it has done with Samsung and HTC — then it’s a win for Microsoft regardless. In any case, if the OEM has to pay just as much to use Android as to go with a proprietary OS, it could see them thinking twice before jumping into bed with Google quite so easily.