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Android's low-end dominance a factor in Microsoft's patent revenue slide

Android's dominance on the low-end of the smartphone market is likely hurting Microsoft's bottom line — at least where patent licensing is concerned.

In its most recent earnings release, Microsoft noted that its patent licensing revenue is down 26% (opens in new tab). As noted by Business Insider, that drop is due to a combination of a market shift to the low-end in China and India, along with a lower overall cut of sales for Microsoft.

Microsoft's head of investor relations, Chris Suh, confirmed as much following the earnings release. From Business Insider:

Suh also noted that not every Android manufacturer has a licensing deal with Microsoft. He didn't name names, but Chinese phone makers typically take a very loose approach toward licensing American intellectual property, and as those inexpensive phones take over the world, Microsoft doesn't benefit as much.

While Microsoft's total patent licensing revenue from deals with Android manufacturers is likely small compared to its other businesses, the company was once reported to be netting around $2 billion per year in royalties.

Dan Thorp-Lancaster is the Editor in Chief for Windows Central. He began working with Windows Central as a news writer in 2014 and is obsessed with tech of all sorts. You can follow Dan on Twitter @DthorpL and Instagram @heyitsdtl. Got a hot tip? Send it to daniel.thorp-lancaster@futurenet.com.

48 Comments
  • Suh lit, fam! Lol
  • Chinese OEM's having no respect to intellectual property are not taking over the world. They are stuck to China and India and other similar corrupt jurisdictions. Those Chinese OEM's seen in developed markets are the ones playing with same rules as the others.
  • Yup!
  • While that may be true, just China and India alone make up a very large chunk of the world's population. They don't need to sell to the rest of the world to affect Microsoft's bottom line.
  • Exactly.
    We're talking of a client base that is nearly a billion strong in these two countries alone. Posted from my Lumia 950XL
  • a billion each :D
  • Around 2.5 Billion or 1/3 of every Human in the Planet #TeamLumia 950 XL
  • Exactly what I said in yesterday's post
  • So the fact of no pushing, advertising, boring hardware, and windows 10 not being complete yet makes no difference at all.. Lol Sent from Lumia 950
  • What does 1st party hardware have to do with revenue from patent license deals? Posted from my Lumia 950
  • I'm talking in general. It's quite a drop, isn't it fir year on year.. I'd be a little worried Sent from Lumia 950
  • Did you even read the article? This is about Android, not WP sales. Posted via the Windows Central App for Android
  • It's Android lowend.. So I couldn't be bothered to be honest.
  • Bothered enough to feel the need of posting something completely unrelated though :P
  • Bits like this remind me of Google's data mining and privacy policies. So many cheap devices yet so much information to sell and market. You really have to admire their particular position.
  • If by "admire" you mean "fear". Google is not trustworthy. Wi-Spy says hi.
  • Most of these cheap Android phones don't have any Google services at all on them.
  • This is so disturbing for me :-(  http://www.zdnet.com/article/why-i-broke-up-withwindows-phone-its-not-me-its-you/
  • Nooooooo.... Mary-Jo was the last holdout!!! Then again, I did the same 6 months ago and left my Icon and went to a Moto X Pure, so I'm not in a position to criticize. Posted via the Windows Central App for Android
  • I did the same about 5 months ago, too. Dropped WP after using it for years.  
  • Thanks for update. Sure everybody was about to ask you /s
  • How tragic.
  • Don't be a drama queen. Frankly she fell for Verizon and gave up on privacy.
  • Don't worry. You know that is the end when Daniel Rubino makes the switch, till then we're still safe...
  • Nah, Joe Belfiore was enough for me.  
  • Daniel already uses a Galaxy and an iPhone along with his Lumia 950. So he need not (although he also can't due to working for a Windows site) make a full time switch.
  • Rubino made the switch long ago. He won't admit it, but ignore any claims of him using WP as his daily driver. He switched to iPhone and the S6 for apps.
  • He didn't "switch" to anything. He's always swapped between different phones, his job requires it.
  • Yeah she did it Posted via the Windows Central App for Android
  • Why is it disturbing? She's a Verizon user. Rather a provider than phone decision. A grown up makes up his own mind anyway.
  • That's not at all why if you read the article, but whatever helps you sleep at night.
  • Another "one per enter" gone. I don't care, never had. I don't care if I'm only one of 20000 people. If it works for me I'm going to use it. I'm an adult and don't need someone's use or approval to use or not use something. Regarding the drop, its hard to sell something if people don't know it's still a thing.
  • Lol she was never a Microsoft cheerleader. You ever listen to her?
  • While in the midst of retrenching, Microsoft needs to ensure that its new products for 2017 are compelling enough in their own right to sell. Relying on patent revenue from another platform is not the way forward to success.
  • @Laura Knotek, relying on patent royalties will only get one so far. Once licenced tech becomes ubiquitous it's harder to defend as an exclusive right as it creates a monopoly. Therefore easily challenged in court and becomes a losing case.
  • I agree. That's why I want to see Microsoft improve its own products. If the new devices in 2017 are properly developed and marketed, I believe that they will be successful. The Surface line is getting better and better already. Posted via my Nexus 7 2013 using the Windows Central App for Android
  • I'll. Never ever ever suggest people to buy windows phone, MS mentions 3year update cycle and 1.5 years later the phone is not eligible to get the updates. Android is way better than Windows phone now i believe if you buy a mid-range phone it'll get next big update. Windows 10 mobile is great but the processor with which lowerend lumias are being launched I don't think they'll get any updates after Redstone.
  • You sound flat out stupid to think the hardware itself will support all software technical advancements. Even Apple Gabe out and said they're hardware isn't made to last beyond 3years. What makes it even worse I'd that you're probably talking about a Lumia 520, 900, 730, 1320, or older. Even my 1520 is 3 years old and while I love it, I understand it needs to be replaced.
  • IPhone 4S. Released in 2011. Still getting the latest updates.
    Lumia 1020. Released in late 2012? Orphaned.
    Apple does it better.
    The end.
  • Then go to iMore you dork.
  • Please tell me Galaxy S 3 is better in update cycle.
  • It's down 26% because Satya brokered deals with many of the big boys to install office apps on their Android phones thereby killing those ones profitable patent agreements like the one with Samsung.
  • Yes I'm surprised nobody caught on to that. Samsung are the biggest name in that list and I'm pretty sure MS gave up a bit of their cash cow to get their apps preinstalled.
  • Is the simple truth about MS not want to produce a lot of low end phones and the hold back of mobile that they actually earn more money on android than they will ever do their own low end phones. So they will concentrate on making a high end expensive Surface device (that you can make calls on :-) ) that will generate a profit like the other Surface line. 
  • Just maybe now they'll pay more attention to windows phone cause their strategy is not working.
  • And this is why microsoft apps on other plattforms are far more advanced, better shaped and less buggy then here on win10 mobile . Because there microsoft is making actual money of it, and on here it simply does not matter.
    If ms would at least understand that universal windows 10 apps that are continuum ready such as office have no purpose on windows phone 8.1 models, we might at least would get mobile version of skype, onenote, word and exel.
    But noooo... That'd be too hard. Android and ios os far easier to develope for and so on.
  • Just so disappointing:(
  • It's not easier to develop for Android or iOS than W10. But some Apis have only come lately to the UWP world. The point is: you need a Windows install, and while you need a Mac to write software for iOS, you can write software for 99% of the mobile market on Mac OOTB, while the same number is 60% for Windows. Hence, devs are buying MacBooks. The buy of Xamarin is too little, too late.