It's debatable whether Google (NAS: GOOG) is getting rich off Android. Google doesn't break out specific Android-related revenues. But someone else is definitely making money off the wildly popular mobile operating system: Microsoft (NAS: MSFT) .
For more than two years, the software giant has been trolling the ranks of Android gadget makers and telling them, "You work for me now," extracting patent royalties. Last year, some analysts even estimated that Microsoft was making more off Android than its own Windows Phone mobile OS. The chances that it's true are even higher now, since Microsoft continues to grow its ranks of Android-related licensees and now covers more than 70% of Android smartphones sold domestically.
The list grows
We can now include two more notches on Mr. Softy's Android belt. The company has just announced that Aluratek and Coby Electronics have signed patent agreements covering Android- and Chrome-based gadgets. Now, these aren't major OEMs, as you're probably unfamiliar with their offerings, but every agreement builds Microsoft's momentum and contributes to its royalty dollars coming in, as well as being a grim reminder to the holdouts of what's coming. Microsoft is now up to 15 licensees.
Aluratek makes low-end 7-inch and 10-inch CINEPAD Android tablets that retail for $150 and $220, respectively. Coby has a broader range of Android tablet offerings, also on the low end.
Microsoft was able to pressure Barnes & Noble (NYS: BKS) into forming a strategic partnership with it. The software giant invested $300 million into a new joint venture subsidiary of B&N, and settled its patent litigation with B&N in the process, with the new subsidiary having a royalty-bearing license to Mr. Softy's patents.
It's unclear whetherAmazon.com's (NAS: AMZN) popular Kindle Fire owes anything. Microsoft hasn't officially said whether its pursuing the e-tailer; however, the two did ink a cross-licensing agreement back in 2010 for other purposes, but Microsoft says that agreement doesn't cover Android tablets. Amazon's version of Android is also heavily modified, or forked, but some experts think no Android tablet can escape Microsoft's wrath. As of yet, there haven't been any definitive announcements, but presumably Mr. Softy is going after Amazon behind closed doors.
Do you see what happens when you become an Android tablet maker? Do you see what happens?
Here's where it gets interesting, though. Microsoft was also targeting Motorola Mobility with its patent attacks before Google swallowed that device maker whole. The company is also dipping into first-party hardware with its own Nexus 7 Android tablet that's built by Asus.
Microsoft has had tremendous success targeting OEMs, and mainstream vendors like Acer, Samsung, HTC, ViewSonic, and LG have all given in to its demands and signed on the dotted line. Asus has yet to sign a patent agreement, even though Microsoft has been going after it from the beginning.
That means that both Motorola and Asus are still getting harassed by Microsoft for Android licensing. Both now also manufacture Android devices directly or indirectly for Google, so the amazing irony is that there's a distinct possibility that Google will eventually have to begin directly or indirectly paying royalties to Microsoft to use its own operating system.
So far, just about all Android gadget makers have inevitably had to concede. Now that Google itself is an Android gadget maker, is it next?
Microsoft's Android royalties are becoming a fact of mobile life for OEMs. However, other component makers aren't subjected to this Android tax yet are still cashing in from its meteoric rise. This company is powering the next generation of Android smartphones and tablets and doesn't need to worry about receiving any strongly worded Android-related letters from Microsoft's legal department. Grab yourself a copy of this free report now while you still can. It won't be free forever.
At the time this article was published Fool contributor Evan Niu owns shares of Amazon.com, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Microsoft, Amazon.com, and Google. Motley Fool newsletter services have recommended buying shares of Amazon.com, Microsoft, and Google, writing puts on Barnes & Noble, and creating a bull call spread position in Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.
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