Every Ahab needs his Moby Dick, every Batman his Joker. To that list of opponents who can't exist without the other, perhaps add Microsoft and Google Android.
According to a new research note from Jack Gold, founder and principal analyst of J. Gold Associates, Microsoft's claims that Android violates its patent portfolio could result in a revenue stream that dwarfs anything the company can collect from its own Windows Phone franchise.
Gold estimates some 12 million Windows Phone units sold per year, which at an average of $15 in licensing per device translates to an annual $180 million. Compare that to the $660 million to $1.1 billion in ActiveSync royalties on an estimated 140 million Android phones and 80 million iPhones, plus another $700 million from Android patent royalties, and Microsoft theoretically wins, whether or not Windows Phone dies with a whimper.
"This is not guaranteed," Gold wrote in his July 11 research note, "given [Microsoft] has not yet signed licenses with many of the vendors and some vendors in emerging markets may not care if they are infringing. But even if Microsoft only generates half this amount, it's a substantial sum. The OS revenues look paltry by comparison to potential IP revenues."
Moreover, he believes that Microsoft will gain some traction from its recent agreement with Nokia, which will see Windows Phone ported onto the latter's devices. That could increase Microsoft's market share to 15 percent over the next three years.
Whether or not Gold's numbers prove accurate, Microsoft certainly sees a competitive advantage in pursuing Android royalties. According to a July 6 Reuters report, Microsoft is demanding that Samsung pay $15 in royalties for every Android-based smartphone the latter produces.
HTC has also agreed to pay Microsoft royalties for Android, along with a host of small companies, including Wistron Corp, Onkyo Corp., Velocity Micro and General Dynamics Itronix. However, not all companies seem quite so willing to pay up; both Motorola and Barnes & Noble have decided to push back against Microsoft with lawsuits of their own.
Microsoft's Android push also comes just as recent reports suggest the company's smartphone market share is trending downward.
For the three-month period between the end of February and the end of May, comScore estimated Microsoft's U.S. share dipping from 7.7 percent to 5.8 percent. If accurate, that comes despite the marketing push behind the Windows Phone platform.
During the same period, adoption of Google's Android platform rose from 33 percent to 38.1 percent, while Apple enjoyed a slight uptick from 25.2 percent to 26.6 percent. Research In Motion continued its market slide, declining from 28.9 percent to 24.7 percent.
During a July 11 keynote speech at Microsoft's Worldwide Partner Conference in Los Angeles, CEO Steve Ballmer described Windows Phone's market presence as "very small." Nonetheless, he went on to insist that other metrics boded well for the smartphone platform, which Microsoft is counting on to counter the competitive threat posed by the likes of Google Android, Apple's iPhone and Research In Motion's BlackBerry franchise.