Microsoft Baidu Deal, Android Royalties Marked Week

Microsoft's week included more Android royalty agreements, reports of falling smartphone share and a search-engine agreement with Baidu.

Microsoft continued its Android march this week, with a report that the company plans on demanding $15 from Samsung for each Android smartphone produced by the manufacturer.

That information apparently came from unnamed industry officials speaking to the Seoul-based Maeil Business Newspaper, and found its way into a July 6 Reuters report. Were Samsung to enter some sort of royalties deal, it would become the latest in an increasingly long string of companies paying Microsoft an "Android tax." Microsoft insists that Google's Android platform violates a variety of patents it holds.

So far, most of those companies have been small: Wistron Corp., Onkyo Corp., Velocity Micro and General Dynamics Itronix have all agreed within the past 10 days to a royalty agreement. However, both Amazon and HTC pay Microsoft, suggesting that some big enterprises are also in Microsoft's sights.

And some companies have fought back. Motorola retaliated to a Microsoft patent-infringement suit with an intellectual-property complaint of its own. And Barnes & Noble, whose Nook e-reader uses Android, filed a countersuit against Microsoft after the latter sued it for patent infringement.

"Microsoft is misusing these patents as part of a scheme to try to eliminate or marginalize the competition to its own Windows Phone 7 mobile-device operating system posed by the open-source Android operating system and other open-source operating systems," read the bookseller's counterclaim, filed April 25 with the U.S. District Court for the Western District of Washington at Seattle. "Microsoft's conduct directly harms both competition for and consumers of eReaders, smartphones, tablet computers and other mobile electronic devices, and renders Microsoft's patents unenforceable."

Even as Microsoft pushes for Android royalties, there are indications that its own smartphone market share is in serious trouble. For the three-month period between the end of February and the end of May, research firm comScore estimated Microsoft's U.S. share dipping from 7.7 percent to 5.8 percent. That comes despite the marketing push behind the Windows Phone platform.

During the same period, adoption of Android 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.

The top mobile OEMs, in descending order of market share, included Samsung, LG Electronics, Motorola, Apple and RIM.

Microsoft can only hope that its upcoming Windows Phone "Mango" update will increase the platform's appeal to consumers and businesspeople. As Microsoft executives demonstrated for a small group of media and analysts during a May press event in New York City, Mango's new features include a redesigned Xbox Live Hub, home-screen tiles capable of displaying up-to-the-minute information, the ability to consolidate friends and colleagues into groups, and visual voicemail-more than 500 new elements in all, if Microsoft is to be believed.

Mango is due for release sometime this fall. Samsung, HTC, LG Electronics and Nokia have all committed to building new Windows Phone devices preloaded with Mango. Meanwhile, Acer, Fujitsu and ZTE have apparently agreed to produce Windows Phone units for the first time.

Microsoft's issues with Google also extended to the search realm, with news that Redmond is pairing with China's largest Internet search provider, Baidu, to provide users with search results for English-language queries.

Although Google continues to dominate the worldwide market for Web search, the company's run-ins with the Chinese government over issues like censorship are well known. Following a hack of Google servers in early 2010 that exposed Gmail accounts of human-rights activists, Google ceased censoring search results in the country and redirected users to the domain in Hong Kong. In March, the company accused the Chinese government of disrupting Gmail service.

A spokesperson for Shanghai MSN Network Communications Technology, also known as MSN China, told the Wall Street Journal July 4 that the results would be labeled as coming from Bing. The deal holds substantial benefits for both companies: Baidu is looking to expand its user base, while Microsoft has made no secret of its desire for inroads into the Chinese market.

The question is whether the Chinese government will demand Microsoft censor those English-language results. "Microsoft respects and follows laws and regulations in every county where we run business," a Microsoft spokesperson told The New York Times July 4. "We operate in China in a manner that both respects local authority and culture and makes it clear that we have differences of opinion with official content-management policies."

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