Microsoft has received five times more income from Android than from Windows Phone
A rough estimate of the number of HTC Android devices shipped is 30 million. If HTC paid $5 per unit to Microsoft, that adds up to $150 million Android revenues for Microsoft.
Context & Ripple Effects
Microsoft spent 2010 buying its way back into phones, committing more than half a billion dollars to jump-start Windows Phone 7 after HTC's own handset sales disappointed in 2009 (Android and Windows Mobile shipments came in below HTC's expectations). Gizmodo framed Android as carrying hidden costs for Microsoft back in August 2010 (Microsoft: Android Hidden Costs Are Expensive) — this Citi-sourced arithmetic puts a number on the other side of that ledger.
The asymco estimate — roughly 30 million HTC Android devices at an estimated $5 per-unit royalty to Microsoft, about $150 million total — landed alongside Silicon Alley Insider's pickup of the same figure. The striking part is the ratio: Android licensing income running five times ahead of what Microsoft's own phone platform brings in, just days after Ballmer previewed the Mango release and the board publicly backed him.
First-order effects
- HTC's Android business now carries a quantified royalty line — about $5 per device on some 30 million shipped units — making Microsoft a direct beneficiary of its rival platform's volume.
- Microsoft's incentive structure inverts: every incremental Android sale by HTC pays Microsoft more than a Windows Phone sale does, at least until Windows Phone's installed base scales well past its current level.
Second-order effects
- Other Android OEMs watching the HTC arrangement now have a benchmark price for settling Microsoft's patent claims, which strengthens Redmond's hand in approaching Samsung, Motorola and the rest with similar per-unit demands.
- Google faces pressure to defend Android's free-to-OEM positioning — if $5-per-device royalties spread across major manufacturers, the platform's cost advantage over licensed alternatives narrows at exactly the moment Windows Phone 7.5/Mango is being pitched with over 500 new features.
Third-order effects
- If the pattern holds, patent licensing becomes a parallel revenue stream that decouples Microsoft's mobile income from its own platform's success — shifting smartphone competition from market-share battles toward royalty capture on rivals' hardware.
- A structural tax on Android of this kind invites either cross-licensing pacts among the major holders or regulatory and legal scrutiny of whether royalties are a legitimate cost of doing business or a lever against an open-source platform.
The trend: Mobile platform economics are splitting into two games — winning users with your own OS and taxing competitors' hardware through patent royalties — and Microsoft is currently profiting more from the second.