Microsoft Takes Six Billion Dollars From Android

A long time ago, Microsoft purchased Nokia's Devices and Services division. In the period between the deal being announced and the deal closing, Nokia's engineers pushed out one last hurrah. The Nokia X range of handsets, powered by Nokia's own fork of Android, tied into Nokia's ID system as well as Microsoft's nascent cloud services.

The specifications placed the handsets in the budget and mid-range market, so we never got to see a full-throttled Nokia Android platform, but I like to think that Finnish engineers were happy to get the chance to show what they could have done had Nokia made a different decision on February 2011 instead of announcing its adoption of Windows Phone.

As the deal closed, it left Microsoft CEO Satya Nadella with a question... would Microsoft pick up the challenge of Android or would the Nokia X be left behind in a metaphorical Finnish limbo? The focus went to Windows Phone, and the upcoming move to Windows 10 across the full portfolio, and Nokia's Android present was left on the doorstep.

If we smash cut to the present day, Microsoft's Windows 10 move is under way with the desk-bound computers, the Surface hardware now on the updated operating system, and Microsoft is as far away from manufacturing and distributing its own Android device as... well... Apple . Why would it want to, when it has the Android platform where it wants it?

Financially Microsoft is one of the biggest winners from the growth of Android as a platform, thanks to its wide range of patents. Samsung's royalty payment to Microsoft in 2013 was for over one billion dollars ($1,041,642,161 and fifty cents), roughly $3.41 per device. With roughly 300 million Android handsets sold last quarter, that could be another billion coming to Redmond.

If you go with Android's total installed base of 1.808 billion smartphones, at that $3.41 value, Microsoft's take from Android could easily reach six billion dollars.

Given each manufacturer's individual negotiations with Microsoft, the licensing fee is the biggest variable in that calculation. It also ignores income from tablet devices, and also puts aside that the recent licensing deals have included something that is just as important to Microsoft as licensing fees... access to a manufacturer's user base.

Those deals have included clauses that not only cover the patents, but also Microsoft's software. Last month's announcement of a deal with Asus noted that "...it paves the way for closer integration between the two companies, including pre-installation by ASUS of Microsoft Office productivity services on ASUS Android smartphones and tablets." To use those apps fully requires a sign-up to a Microsoft account and ongoing use of its cloud support services.

While the money from Android will always be welcome, the access to Android's user base is even more important to Microsoft's ongoing financial health. Satya Nadella didn't need Nokia's gift of an alternative Android platform, he has everything he needs in the original.

(Now read how Microsoft saved the iPad Pro's software problems...)