Microsoft Gets $444 Million Per Year from Android

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Google calls it extortion, but Microsoft says it’s just fair play. Analysts say Microsoft will earn about $444 million this year from Android-related licensing. But will it be enough to compensate for business lost to tablets and smartphones?

Microsoft is considered one of the few companies that have successfully charged a “toll” on Android devices. Microsoft had a licensing agreement with HTC last year and with Samsung just recently for the use of its technology patents. Under the agreements, said companies will be paying Microsoft a few dollars for each Android device sold. Other smaller companies have similar agreements with Microsoft.

Tech analysts from Goldman Sachs say this can be anywhere in the range of $3 to $6 per unit, and adding up, these royalty payments will result in about $444 million in revenue for Microsoft for fiscal year 2012, which starts July 1, 2011 and ends in June 30, 2012. Goldman Sachs estimates that Microsoft’s receipts from Android are about $0.04 earnings-per-share (EPS) annually.

This is in stark contrast with other Android competitors, such as Apple, which has chosen to go through litigation, particularly with Samsung, in order to enforce its patents (although Apple is suing on the basis of design patents, and not technology patents.

But while Microsoft is earning hundreds of Millions from Android, it’s not all positive. Looking at the bigger picture, this amount is just a small piece of Microsoft’s entire business. Microsoft is estimated to earn $75 billion for FY 2012, or about $2.86 per share. Given this amount, Android fetches them just about 1.4% of their business. However, consider that Android devices are a big threat to Microsoft’s dominance as a computing platform. Likewise, Windows Phone 7 is floundering amid strong Android smartphone sales. Will $444 million be enough to compensate for potential losses that Microsoft is facing from Android as a platform?