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You won't hear Steve Ballmer say "I love this DEAL!" but Samsung's agreement to pay licensing fees is a big win

"Under my thumb
The girl who once had me down
Under my thumb
The girl who once pushed me around."

-- Mick Jagger and Keith Richards of The Rolling Stones, 1966

The iconic track by The Rolling Stones comes to mind as news of Microsoft Corp.'s (MSFT) new licensing deal with Samsung Electronics Comp., Ltd. (SEO 005930) broke today.  After all, Samsung is top seller of smart phones powered by Google Inc.'s (GOOG) Android OS, which quite literally has Microsoft's Windows Phone 7 smart phone OS down in sales.

But as much as Android has pushed Microsoft around in the market, Microsoft now has Android exact where it wants it -- under its thumb.  It announced [press release] today that after negotiations, Samsung had agreed to enter an intellectual-property cross-licensing agreement.

The old saying goes "you'll attract more flies with honey than vinegar".  While Microsoft's licensing pressure might not seem so sweet to some, it's at least a gentler approach than Apple, Inc. (AAPL), which has sued [1][2][3][4][5][6][7][8] the top three Android manufacturers (Samsung, HTC Corp. (SEO:066570), and recent Google acquisition Motorola) seeking to ban their handsets sales with nary a mention of a licensing settlement.

Indeed Microsoft's approach won over HTC, who was facing a lawsuit from Apple at the time, and now has won over Samsung, the fastest growing handset maker on the market, and the top maker of Android smart phones.

Reportedly the HTC deal was worth $10 USD per handset sold.  For the Samsung deal Microsoft reportedly offered a $15 USD per handset fee, while Samsung countered with a $10 USD per handset fee.  It seems likely that the pair met in the middle with a $12-13 fee.

Samsung and HTC both make Windows Phone 7 handsets, though, those devices haven't sold anywhere near the number of units as their flagship Android devices.

Of Android's "big three", only Google subsidiary Motorola remains without a licensing deal for Microsoft's intellectual property.  The Wall Street Journal is reporting that Microsoft used the announcement as a chance to issue a request/threat to Google/Motorola pressuring it to license.

For Google the situation could be worse.  It still will likely be able to turn a profit on its handsets and it will be free to focus on Android's other legal foes like Oracle Corp. (ORCL) (who is suing Google for Android's use of Java) and Apple.  But it's also not a very pleasant situation as Microsoft's licensing fees tack between $10 and $15 in additional costs onto each handset sold.  Those costs make Google's platform less attractive and competitive offerings more attractive.

Microsoft's Windows Phone Division President, Andy Lees, gushed about the deal, commenting, "Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone and we’re investing to make that a reality. Microsoft believes in a model where all our partners can grow and profit based on our platform."

And Samsung tried to spin the news enthusiastically, with Samsung mobile devices global marketing VP Dr. Won-Pyo Hong remarking, "Through the cross-licensing of our respective patent portfolios, Samsung and Microsoft can continue to bring the latest innovations to the mobile industry. We are pleased to build upon our long history of working together to open a new chapter of collaboration beginning with our Windows Phone "Mango" launch this fall."

However, make no mistake, Microsoft is the winner here, and at the end of the day Google, and to a lesser extent, Samsung, are the losers.  Sure Microsoft would love Windows Phone 7 to be the kind of ringing success it thus far hasn't been.  That would give it all sorts of auxiliary revenue streams -- say from data mining and app sales.  But at the end of the day Android succeeding is almost as valuable to Microsoft, as it will get a sweet licensing cut of virtually every Android device sold -- without having to go to the hassle and expense of actually designing, advertising, and selling the product.


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RE: What IP are they using of MS's?
By Reclaimer77 on 9/28/2011 4:23:59 PM , Rating: 2
Ahaha yeah. Because you know, smartphones and tablets represent a "paradigm shift" in the way the world works, and Apple is taking the lead!!! Microsoft "failed" and now they are spiraling down the drain.

That sound close enough?


By cjohnson2136 on 9/29/2011 11:38:00 AM , Rating: 2
That sounds dead on


RE: What IP are they using of MS's?
By Pirks on 9/29/2011 11:52:26 AM , Rating: 1
Apple grew past MS even profit and revenue wise, so yeah, there's something behind Swash words, something called Big Money. I wouldn't care about Swash just like you guys do but his words are supported by Big Money that Apple makes these days. You do not want to argue with Big Money, do ya guys? That'd look stupid to me. Arguing with Swash does not look stupid, but arguing with Apple's profits and revenues that surpassed even MS's... that's err... not very smart, to say politely. Money talks, you know.

And I'm not talking about market cap here. Just revenues, profits and cash reserves. By all three metrics Apple has beaten MS and the gap between them continues to grow. Not a good sign for MS, IMHO.

Apple's outlandish market cap is just an insult added to the injury. It's like spitting on the body of your fallen enemy. Enemy doesn't care, it won't hurt but ewww it looks nasty :(


RE: What IP are they using of MS's?
By bennyg on 9/30/2011 2:46:50 AM , Rating: 2
While you can't pirate an iPod/Phone/Pad and therefore can charge whatever you want, most people will eventually get sick of toys and gimmicks. However every computer still needs an OS. Plus Microsoft kicked a massive own goal with Vista which meant the world was pirating XP for 5 extra years.

Post-Iphone 4S/5 sillyness and hysteria, I'd be selling off Apple shares if I had any, their market cap is wildly overvalued and they are the kind of stocks that get pummelled as soon as real panic starts (see Tech Wreck). I'm not sure their market penetration is as solid as everyone thinks (especially since their R&D budget seems to be spent on nothing but lawyers of late)

But then again I was saying in 2001 there was gonna be a widespread revaluation and it took a fair while to happen. So, meh.


RE: What IP are they using of MS's?
By Pirks on 9/30/2011 10:18:18 AM , Rating: 2
quote:
I'd be selling off Apple shares if I had any, their market cap is wildly overvalued and they are the kind of stocks that get pummeled as soon as real panic starts
The Techie Apple Conundrum (TAC)

The TAC arises often on sites such as Daily Tech because the attraction of Apple products, and hence Apple's huge success as a company, is dependent on features and aspects of product design invisible to almost all Techies. Thus Apples success is mysterious, vexing and ultimately challenging.

Techies for example often focus on feature lists and technical specifications and compare one such list to another and look at comparative prices and cannot understand that someone would pay more for an "inferior" spec.

This of course misses a critical aspect of Apple product design, one of the keys to the success of Apple in the consumer market, which is that for many (perhaps most) consumers having fewer technical features is a positive thing. This seems paradoxical to Techies but this is because they fail to comprehend what the actual experience for the vast majority of consumers of hi-tech products actually is - which is bad.

Consumers constantly encounter products that don't work as advertised, products that squeeze so many functions into an item that using it for its main purposes is dreadfully complex, products that even when their function should be simple (i.e. to play music, to play a DVD, to surf the web, to write emails) require a thick user manual (many of which which are often written by engineers and are thus unhelpful).

Most hi-tec products are user-unfriendly for most consumers. But not to Techies because they have technical knowledge and so can cope with poor/arcane design. In fact Techies like such products because they find technical challenges fun and because it makes them useful (they are always helping people solve their technical problems) and thus boosts their self esteem.

Some kit, almost all non-Apple desktop computers for example, are not just difficult and poorly designed but are positively scary for almost all consumers. Many non-Apple desktop computers seem very complex to operate, go wrong for no clearly understood reasons and worst of all seem to be under constant attack. Watching someone move from a non-Apple desktop computer to a Mac you can often see them slowly losing their awful, and most of the times paralysing, fear of infection and attack. As the fear fades the pleasure of using their computer increases dramatically and people start to love their computers rather than secretly hating them. Thus another mac-head is born.

The emblematic product for TAC is the iPad. Here is a product that comes on instantly, looks and feels gorgeous, feels fast, is easy to operate and does (in a fantastically convenient form factor) most of what most people do most of the time on their computer (ie browse the web, send emails, watch movies, read stuff and look at and share photos). Plus it has two huge benefits for most consumers. First it doesn't feel like a computer - this is a good thing for most people because most people's experience of using computers has been bad. Secondly it feels very safe because of Apple's curated computing model, and most users of computers have previously felt unsafe most of the time.

The very reasons that make the iPad such a huge success are the very reasons that Techies don't get it. If one product above all induces TAC its the iPad. Techies say "but Apple has an iron grip and is killing our freedoms" (people want safety much more than some obscure technical freedom), "the iPad doesn't have [insert any number of features that consumers don't care about]", "its not a real computer" (exactly).

So the continuing, relentless and accelerating success of Apple seems almost inexplicable to most Techies, "how could such products be so successful?"

The answer Techies come up are fairly predictable:

- Apple's voodoo marketing: Apple is pulling the wool over the consumer eyes (sometimes this is blamed on media hype).

- Apple's evil lock in: Apple has a locked down and closed platform, once sucked in people can't leave.

- Apple consumers and users are idiots: Fooled by marketing and glitzy packaging the sheep can be sold everything.

Because Techies believe that these are the real reason people buy Apple products (other than the more obvious reason which is that consumers actually like them a lot) Techies also believe that this state of affairs cannot possibly last and therefore the final piece of the Techie response to Apple falls into place. Deranged by TAC Techies often come up with the most delusional statement of all - Apple is doomed .


(C) Tony Swash, June 2010

Reprinted here from the Daily Tech post at http://www.dailytech.com/article.aspx?newsid=18738... without the author's permission.


"We’re Apple. We don’t wear suits. We don’t even own suits." -- Apple CEO Steve Jobs














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