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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: Nobody loses.
By Tony Swash on 9/29/2011 9:39:34 AM , Rating: 0
quote:
Sorry Tony and Pirks, but this is why Microsoft is simply smarter than Apple and why they have always been the bigger company.


Apple is valued at twice as much as Microsoft. Apple's Revenues exceed Microsoft's. Apple's profits are bigger than Microsofts. The revenue from Apple's sales of the Mac exceed the revenues Microsoft makes from Windows. I fear your view is outdated.


RE: Nobody loses.
By cjohnson2136 on 9/29/2011 11:26:12 AM , Rating: 2
And your comparing the revenue off a computer vs the revenue off an OS. Stop comparing Apples to Oranges


RE: Nobody loses.
By Tony Swash on 9/29/2011 6:29:20 PM , Rating: 1
quote:
And your comparing the revenue off a computer vs the revenue off an OS. Stop comparing Apples to Oranges


I am just commenting on someone elses comment which compared the size of Microsoft's business to Apple's business and mistakenly thought that Microsoft was bigger. It isnt. By any metric. And the fact that Mac revenues are bigger than Windows revenues is a nice illustration of how much things have changed. Time you old fashioned guys caught up with the tech world of today rather than dreaming about yestayear.


RE: Nobody loses.
By its tom hanks on 9/29/2011 2:49:44 PM , Rating: 2
Bill gates plans on giving away 90% of his money before he dies. He's leaving his own kids with only 10 million each. Meanwhile, steve jobs wants you to pay $100 for 16gb of extra memory, instead of giving you a micro sd slot so you can buy the same memory on amazon for $40. You can throw your money stats around all day, that has nothing to do with who the smarter company is, simply which company retards like you are willing to pay more to for a logo.


"Game reviewers fought each other to write the most glowing coverage possible for the powerhouse Sony, MS systems. Reviewers flipped coins to see who would review the Nintendo Wii. The losers got stuck with the job." -- Andy Marken














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