The investment arm of Citi released a massive report on Microsoft this past Friday. It had a couple of choice tidbits for those of us who have an affinity for Windows Phone 7, namely that HTC pays $5 per Android device it makes to Microsoft for patent protection, and also that Citi believes Microsoft may be able to make a move on the tablet market with the release of Windows 8, possibly moving into the number 2 position.

Both of these points are relevant to Windows Phone, but for different reasons. Android is the 800 pound gorilla in the room now, and a lot of people attribute its runaway success to being free (as in no licensing fees), and being free (as in unencumbered by intellectual property requirements.) If HTC is paying Microsoft $5 for every phone it puts Android on, it indicates that HTC believes Android might violate some of Microsoft’s intellectual property rights. The report also suggests that Microsoft will be trying to get other Android device manufactures to pay upwards of $10 per device. If that is true, then the $15 per device that Microsoft charges is less of a deal-breaker for an arguably cleaner OS.

The report also mentions that Microsoft is in a position to make a serious play on the tablet market with Windows 8, possibly coming in just below Apple's iOS. It’s no secret that Windows 8 will be available on ARM processors, but there is evidence to suggest that Windows 8 will use, at least on some devices, Metro for a UI. It may not be Windows Phone 7, but it might just end up being Windows Phone 8, and if analysts are correct (always a big if), then we may just get our 10” Metro UI tablet in the coming year.

Sources: Business Insider and Reuters