Of course, like all such estimates, these numbers are drawn from a bit of crystal ball gazing and some well informed guesses about what Microsoft is really doing inside its accounts. For even a public company of this size doesn’t have to tell us all exactly what it is doing. But the basic contention is that Microsoft is collecting patent royalties on hardware being sold with Android on it and that the revenues from this are considerably larger than the revenues from Windows Phone. Or, in slightly more detail, the net profits on the receipts are five times greater.
The numbers come from an industry analyst release which was reported upon here:
To arrive at Microsoft’s Android licensing revenues of around $2bn a year, the analyst assumed that Microsoft makes an average of $5 per unit on each Android sold, and that Microsoft has about 70 percent of the total market covered by its licensing deals.
There’ve been credible reports that Samsung is paying $10 a unit meaning that that revenue could be rather higher. But do note that in this instance credible means just that, credible or believable, not necessarily wholly true and accurate.
Assuming 90 percent gross margin, he figures that Microsoft made $1.6bn in the 2013 financial year, and will make $1.73bn in fiscal 2014, and $1.82bn in 2015.
By those numbers, Android will still be a bigger source of profits for Microsoft than its Windows Phone business, which Sherlund believes will bring in $3.3bn revnenues this year with gross profits of just $347m.
The licence fees at issue here are usually for the FAT stack. Something which Microsoft developed years ago and which they don’t have to spend any more on keeping up to date, or at least very little. Their major expenses here will be on the accounting department to count all the money rolling in and a bit on legal as they hunt down those not yet paying them.
But I do think that’s an interesting number. That Microsoft are making five times the profit from Android that they are from Windows Phone.