back to article How much is Microsoft earning from its Android taxes again?

We’ve known for years that Microsoft makes more money from Google’s Android than Google does itself – but now we have a better idea of how much hidden “tax” is included in the price of an Android handset. That’s because Samsung and Microsoft have fallen out, and Redmond’s lawsuit sheds light on the secretive world of patent …

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  1. Flocke Kroes Silver badge

    According to the patent lobby...

    Hundreds of thousands of free software developers are reading through patent filings, and after they have read some, they are instantly ready to release software.

    In the real world, programmers do not read patent filings because at best it is a complete waste of time, and at worst, triple damages for wilful infringement.

    Why do we have a patent system at all?

    1. Anonymous Coward
      Anonymous Coward

      Re: According to the patent lobby...

      "Why do we have a patent system at all?"

      To protect big companies from competition and to keep patent lawyers in new BMWs.

    2. Graham Marsden

      @Flocke Kroes - Re: According to the patent lobby...

      I would have up-voted you if it hadn't been for that last line.

      Patents, when granted and applied properly serve a useful purpose. Unfortunately, of course, these days the system has been so abused with ridiculously broad patents being granted (not to mention software patents) that the whole system has broken down and needs root-and-branch reforming.

      1. Flocke Kroes Silver badge

        Re: @Graham Marsden

        Have you got evidence of a patent that was granted and applied for properly serving a useful purpose?

        1. Graham Marsden

          @Flocke Kroes - Re: @Graham Marsden

          Are you seriously asking me that? (NB, for clarity, I'm talking about *proper* patents, ie ones for actual inventions, not "methods" or "software" or nonsense like that)

          1. Anonymous Coward
            Anonymous Coward

            Re: @Flocke Kroes - @Graham Marsden

            Even in those circumstances it's difficult to see why they should be protected for more than 5 years. Looking back at many inventions it is often the case that several people were looking at the same thing around that time so it seems unreasonable to give a huge advantage to the one who happened to get there first.

        2. Anonymous Coward
          Anonymous Coward

          Re: @Graham Marsden

          Westinghouse's "Air Brake" perhaps?

    3. JeffyPoooh
      Pint

      Re: I do wonder

      @AndyS asked: "@TheVogon: Why are you replying to a comment below yours?"

      Because there's a discontinuity in the Space-Time Continuum.

      1. Michael Wojcik Silver badge

        Re: I do wonder

        Because there's a discontinuity in the Space-Time Continuum.

        Maybe Eddie can do something about it while he's there?

    4. Charles Manning

      Re: According to the patent lobby...

      I wrote some of the software that MS claimed was infringing. It was not, and MS finally backed down after a fight.

      By my calculations, MS would have made somewhere between $50M and $100M out of my efforts.

      When one of the phone vendors wanted me to investigate something, they offered no payment. I was feeling a bit grumpy that day and suggested they'd paid MS for the use of the software so perhaps they should ask MS for tech support too.

      You can't get too twisted up about this because you'd just end up a bag of ulcers.

      According to one of the lawyers I dealt with, MS has a huge patent portfolio that is well orgaised and indexed. They have people going through the patents and trying to see how these might be applied. Anything that looks like it might be close to infringing is thrown on the pile. This is a huge revenue stream for MS, so it pays to spend a few million per year organising it into a profitable money spinner.

  2. Anonymous Coward
    Anonymous Coward

    I do wonder

    How much would Samsung be paying Microsoft if Samsung was the US company, and Microsoft was Korean?

    A lot of these cases seem to have at least an element of protectionism.

    1. TheVogon

      Re: I do wonder

      "How much would Samsung be paying Microsoft if Samsung was the US company, and Microsoft was Korean?"

      The reason that Samsung pay Microsoft is that Microsoft spend a far higher percentage of revenue on R&D - and Microsoft accordingly have a much stronger patent portfolio.

      Hence why Apple (a US company) have to pay Nokia (a non US company) similar patent fees....

      "If you make an Android phone you have to pay Microsoft $3.29. If you make a Windows phone you have to pay Microsoft nothing at all."

      And you also likely have to pay Nokia and Apple. But in this case Microsoft make more money overall - both from Bing search advert revenue - and from the Windows Store.

      1. Anonymous Coward
        Anonymous Coward

        Re: I do wonder

        I was thinking of the Apple/Samsung lawsuit that rolled on at length in the US while a UK judge dismissed it in hardly any time at all.

      2. AndyS

        Re: I do wonder

        @TheVogon: Why are you replying to a comment below yours?

      3. Gordon 10
        FAIL

        Re: I do wonder

        Im not sure comparing R&D spend between M&S and Samsung is useful in this case.

        1. The lag between R&D spending and Patent granting is HUGE - it probably takes 10 years to realise the R&D spend in a granted payment.

        2. Most of that $3.29 payment probably comes from 5, 10 or 20 year old Windows and Dos patents, and is no guide to what M$ is doing now.

        3. Samsung and M$ have vastly different commercial interests outside of the mobile and computing sectors - we don't know how their internal sectors breakdown that overall R&D budget. Its entirely possible that MS's Nokia division has a fraction of the R&D budget that Samsungs phone division has or vice versa.

        1. h4rm0ny

          Re: I do wonder

          >>"1. The lag between R&D spending and Patent granting is HUGE - it probably takes 10 years to realise the R&D spend in a granted payment."

          Microsoft is rather more than ten years old. Founded in 1975 as it happens. And they've historically put a lot of resource into R&D. Not to mention they have a history of buying up competitors along with any IP that goes with that. I can't comment on Samsung's R&D budget as I don't know much about it, but the above counter-argument is wrong.

          >>"2. Most of that $3.29 payment probably comes from 5, 10 or 20 year old Windows and Dos patents, and is no guide to what M$ is doing now."

          Speculation. All we can reasonably say is that FAT is probably one of the patents. But we don't know about the rest of them.

      4. Indolent Wretch

        Re: I do wonder

        "The reason that Samsung pay Microsoft is that Microsoft spend a far higher percentage of revenue on R&D"

        In this case the patent is for a hopeless kludge, desperately applied to try and keep relevant an appalling piece of software that was barely fit for purpose when it was first released. R&D spend has absolutely nothing to do with it.

        The idea that anybody should have to pay anything for the damn thing is an insult to everything that software development is about.

        1. TheVogon

          Re: I do wonder

          "In this case the patent is for a hopeless kludge, desperately applied to try and keep relevant an appalling piece of software that was barely fit for purpose when it was first released."

          I don't think much of Android either.

      5. Anonymous Coward
        Anonymous Coward

        Re: I do wonder

        The reason that Samsung pay Microsoft is that Microsoft spend a far higher percentage of revenue on R&D

        No. The value of a patent doesn't matter how much you spend on R&D (actual R&D, not buying patents) - it's how critical the patent is.

        For example, if you spent 10 years on a 5% faster mouse trap and try charging me your salary x10 - I'd tell you to piss off, and I'll continue with my slightly slower method.

        If, however, you spend a Friday afternoon day dreaming and came up with something irreplaceable that need in my product, I'd "have" to give you what you want (but ask too much, I'll fold).

        1. Anonymous Coward
          Anonymous Coward

          Re: I do wonder

          Not to defend Microsoft, but they have been in the smartphone game quite a bit longer than Samsung. The Windows Mobile product line didn't exactly set the future direction of the smartphone market, but surely there are a few patents there relevant to Android?

          That's also why Apple is paying royalties to Nokia. It has little to do with R&D spend, more to do with the fact that Nokia has been making phones since before Jobs' return, while Apple sold their first in 2007. One would think Nokia had a lot of patents relevant to basic cell phone functionality, let alone smartphones, because they had built hundreds of models before Apple had built its first.

          Even if Apple had some patents covering the modern smartphone (differentiating from the pre-multitouch smartphones Nokia sold in the early 2000s) they could assert against Nokia, net/net Apple would be expected to end up paying as Nokia would have way more relevant patents.

      6. Daniel B.
        Boffin

        Re: I do wonder

        The reason that Samsung pay Microsoft is that Microsoft spend a far higher percentage of revenue on R&D - and Microsoft accordingly have a much stronger patent portfolio.

        Nope, the reason Samsung pays Microsoft is because Microsoft has been pulling a SCO on the main Linux players and claiming that Linux uses MS patented stuff, but fail to produce the "offending" code. They just FUD their way into extortion, and up until now, both the Linux and the Android players have just ponied up the cash. Samsung has probably reached a point where it can actually bring up the fight against Microsoft. It would be interesting to see those patents either invalidated or proven not to be infringed at all, SCO-style. You'd think the IT industry would learn its lesson from the SCO fallout, but it doesn't seem to be the case.

        1. h4rm0ny

          Re: I do wonder

          >>"Samsung has probably reached a point where it can actually bring up the fight against Microsoft. It would be interesting to see those patents either invalidated or proven not to be infringed at all"

          This case has nothing to do with the validity of the patents. Samsung are trying to exploit what they see as a loophole resulting from the Microsoft acquisition of Nokia's devices and services division. It's almost entirely irrelevant to what the patents actually are.

  3. Ralph B

    Strange World

    If you make an Android phone you have to pay Microsoft $3.29. If you make a Windows phone you have to pay Microsoft nothing at all.

    1. Anonymous Bullard

      Re: Strange World

      So it makes you wonder how Microsoft are getting a return for their investment on Windows phones/slabs.

      Actually, we already know the answer, that's why they're so hell bent on the walled garden approach and slurping as much info on us as they can. I remember the good old days when you could just buy an OS (licence) and be done with it. People complained about the price, but with a £0 OS there's a much bigger price.

    2. kmac499

      Re: Strange World

      If you make an Android phone you may well sell a few ..

      If you make a Windows phone ....?

    3. Doctor Syntax Silver badge

      Re: Strange World

      i wonder what the EU competition commissioner might make of this.

  4. Anonymous Coward
    Anonymous Coward

    And that is why mobile Windows is so shite - they want you to use Android.

    1. Anonymous Coward
      Anonymous Coward

      RE: And that is why mobile Windows is so shite - they want you to use Android

      Having owned iPhone 5S, HTC One, Moto G (2nd edition) and Lumia 800, 720, and 925, I have to say that although Android is very usable and has far more apps (often of better quality even when WP8 has that app), I still feel nothing but pity for those Android users who have never tried living WP.

      It's all a matter of taste/preference but, for me, nothing in Android is superior enough to WP to make me want to use that hodgepodge of kludge in preference to the consistent delight that is WP and, to some extent, iOS.

      YMMV.

      1. Anonymous Coward
        Anonymous Coward

        Re: RE: And that is why mobile Windows is so shite - they want you to use Android

        The number of people with a WP in this forum seems to be much greater than in out in the wild. I wonder why that is?

        1. hoverboy

          Re: RE: And that is why mobile Windows is so shite - they want you to use Android

          Because this forum is Worldwide and not just the USA? I know it's an unrepresentative sample but I work in a German aerospace company where people will laugh at you for not having a WP; (stupid) foreigners use Android, (fashion-conscious) 'Marketing' use iPhones, all the engineers use WP...

          1. Zane

            Re: RE: And that is why mobile Windows is so shite - they want you to use Android

            Ok - and so why is it that your colleagues laugh about people using phones that actually do what you want and where you can install apps you really need?

            Yes I also know some people you have a WP - most hate it. The ones who like surprisingly have never had an Android or an iPhone.

            /Zane

        2. Yet Another Anonymous coward Silver badge

          Re: RE: And that is why mobile Windows is so shite - they want you to use Android

          A number of people in this forum work in corporate IT for shops that are heavily microsoft dominated. So its useful to have the tools to connect to them natively.

      2. Anonymous Coward
        Anonymous Coward

        Re: RE: And that is why mobile Windows is so shite - they want you to use Android

        "... to make me want to use that hodgepodge of kludge in preference to the consistent delight that is ..."

        And here I thought it was just me that had concluded that Android sucks donkey balls!

        I was drooling at the Sony X3 the other day, too big for me, but the compact version seems like a boss piece of hardware - sadly, it carries the encumbrance of Android :(

        You see what I did there? I praised sony, denigrated Android and quoted a commentard who was positive towards WP and iOS. Crikey, I just need to add that Linux on the desktop is a lost cause and too hoplessly fragmented to ever be a player and I will have ticked every "anti" box.

        This must be deserving of a new record in the number of downvotes, not?

  5. cambsukguy

    As a percentage of profit

    A razor-thin profit after marketing costs etc., three bucks plus is quite a lot, apparently a Billion dollars a year for one company alone.

    A million here and a million there and pretty soon you are talking real money - to paraphrase Tom Clancy.

    1. P. Lee

      Re: As a percentage of profit

      > three bucks plus is quite a lot,

      Indeed. Perhaps not on the S5, but on the far more numerous low-end phones, though it might be calculated as a percentage.

      Far more interesting would be to know if it covers any real tech or if its just quid pro quo for Samsung getting a good deal in other areas - oem windows licensing perhaps.

  6. Anonymous Coward
    Anonymous Coward

    Microsoft scrapping WP royalties

    "Even Microsoft admitted that manufacturers need costs to be as low as possible, when it scrapped royalties for Windows Phone"

    It may have admitted that, but scrapping WP royalties was/is really a desperate move trying to not lose what little share WP already has after they realized that Nokia alone is not going to be enough to realize their "cloudbile" strategy.

    These tactics have not worked well in the past. Remember when they extended XP sales and support windows? That was due to pressure from enterprise customers, but also because they were panicked over Netbooks being sold with some Linux variant installed. That was useless, as Notebooks were a passing fad, Chromebooks are cornering the lower end of the laptop market and lots of enterprises are still laboring on how/when to move off XP.

    1. Anonymous Dutch Coward
      Coffee/keyboard

      Re: Microsoft scrapping WP royalties

      "Cloudbile" - great term for their "strategy": feeling nauseous already ;)

      1. Michael Wojcik Silver badge

        Re: Microsoft scrapping WP royalties

        "Cloudbile" - great term for their "strategy": feeling nauseous already ;)

        It's a bit of a mouthful. "Clobile" would be more along the lines of the usual Reg portmanteaux.

        Indeed, I find it simultaneously euphonious and obnoxious, and I urge the Reg editors to adopt it immediately.

    2. Anonymous Coward
      Anonymous Coward

      Re: Microsoft scrapping WP royalties

      "Chromebooks are cornering the lower end of the laptop market "

      Not really - with the latest Intel Chipsets you can get a low end Windows laptop for about the same cost as a Chromebook. Chromebook might do a job, but it's vastly inferior to a proper PC.

      1. Anonymous Coward
        Anonymous Coward

        Re: Microsoft scrapping WP royalties

        Chromebooks might be inferior to a "proper PC", but Windows net-books are inferior to Chromebooks. Try either, you'll see.

      2. Anonymous Coward
        Anonymous Coward

        Re: Microsoft scrapping WP royalties

        "with the latest Intel Chipsets you can get a low end Windows laptop for about the same cost as a Chromebook"

        Even if that is factually true, the target demographic for people wanting a low end computer to do basic tasks does no longer need Windows with all its complexities. These people end up buying a Chromebook if only because it is simpler.

      3. Anonymous Coward
        Anonymous Coward

        Re: Microsoft scrapping WP royalties

        Honestly, I have never seen even 1 chromebook in the wild. It must be because I live in the affluent part of the world where everyone who has a job can (and does) have an iPhone, and notebooks have long since been relegated to a permanent desk position and replaced by tablets.

        Honestly, I have not seen even 1 in the wild. Can someone show me what part of the world these massive chromebook sales are happening in?

      4. Anonymous Coward
        Anonymous Coward

        RE: Chromebooks are cornering the lower end of the laptop market

        Turns out from more recent figures that the entire Chromebook market actually composes around 1% of laptop/notebook sales.

        Of course the big figures trumpeted a few months ago that got Chromebooks on the radar (was it NPD data? I cannot remember) were clarified to be representative of education sales only not the whole market, but the deception had already taken hold.

        Not to denigrate Chromebooks (I'm on my second), but I do so like a little more accuracy in numbers.

    3. Jess

      Re: as Notebooks were a passing fad

      (Presuming that is a typo for netbooks)

      I don't agree. I think the maket was for simple devices that access the net without the bother of Windows .Microsoft prevented the netbook fullfilling this, so the market was ripe for the tablet.

      1. Anonymous Coward
        Anonymous Coward

        Re: as Notebooks were a passing fad

        "(Presuming that is a typo for netbooks)"

        Indeed it was. Thanks for the correction, I saw it too late, however.

      2. P. Lee

        Re: as Notebooks were a passing fad

        > think the maket was for simple devices that access the net without the bother of Windows

        Perhaps, but I suspect the cost is in the marketing, screen and battery. None of these things reduce when you take Windows out of the equation. RAM and CPU are relatively cheap.

    4. MacroRodent

      Re: Microsoft scrapping WP royalties

      Chromebooks are cornering the lower end of the laptop market

      Tablets, actually, and big smartphones. I don't think I have seen anyone use a Chromebook, but my morning commute in the Helsinki local train is full of people staring at tablets and smartphones, with a sprinkling of laptops. They now clearly outnumber people reading newspapers, magazines, or books.

      No wonder the paper industry is in difficulties.

    5. Anonymous Coward
      Anonymous Coward

      Re: Microsoft scrapping WP royalties

      Had Microsoft had zero royalties for WP7 from day one, back when Android was a fuddled mess in the 1.x and 2.x days, they probably would have had a much better market share. Maybe not as high as Android, but they'd likely exceed Apple's share and be a true competitor instead of an also-ran.

      1. Daniel B.

        Re: Microsoft scrapping WP royalties

        Had Microsoft had zero royalties for WP7 from day one, back when Android was a fuddled mess in the 1.x and 2.x days, they probably would have had a much better market share.

        I doubt it. Windows Mobile had a rock bottom share since forever, and anything associated to Windows Mobile would usually see their market shrink & die in a matter of months, or years if they were really lucky. See Palm, Sendo, even HTC. It isn't really a wonder that WP7 also dragged Nokia from #1 OS (Symbian) to "right next to the Other category". It also didn't help that when MS dumped WinMo 6.5 for the full rewrite WP7, they had already done the "dump & rewrite" trick a couple of times already. Remember Windows CE? A lot of stuff was deprecated/obsoleted when they dumped that in favor of Windows Mobile. Some devs commented that they were feeling deja vu on the whole issue; the thing is that by WP7's announcement, it was far more profitable to develop for iOS or Android than the dying WP/WinMo ecosystem. Hell, even BlackBerry looked more promising than WP!

        1. Anonymous Coward
          Anonymous Coward

          Re: Microsoft scrapping WP royalties

          I will NEVER work with any type of Microsoft/Windows mobile again. The platform is far too volatile and unstable (in terms of API/support) to commit to working on anything beyond a proof of concept. They constantly re-writing, starting from scratch, or "re-imagining", you can't even commit to learning about it.

          You just know they're going to change it again, too - because this current iteration is also failing spectacularly (apart from the same fanatic wackos buying into it again).

          (Actually, that could apply to most Microsoft platforms - but mobile especially)

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