LG deal means bigger Android payday for Microsoft

Microsoft’s final curtain at CES 2012 has come with some well-deserved attention for Windows Phone devices. Truth be told, though, Microsoft makes way more money from Android devices than Windows Phone, and the payday is about to get bigger thanks to a new licensing agreement with LG.

Tech patent and intellectual property analyst Florian Mueller notes in a blog post that Microsoft and LG have entered into a licensing agreement that covers LG’s Android and Chrome OS devices. The agreement is actually an extension of an existing agreement between the two that covers LG’s Linux-based embedded devices.

In October of last year, Goldman Sachs projected that Microsoft will make $444 million from Android devices in 2012 as a result of the licensing agreements in place at the time. With the addition of LG devices, it is possible that Microsoft could make more than half a billion dollars from the sale of smartphones and tablets it is competing with.

It’s not a bad deal if you can get it. Imagine if Coca Cola got a cut every time someone bought a bottle of Pepsi, or if Ford got a check every time someone bought a Toyota. Basically, Microsoft is in a very win-win position where even if it loses the mobile market, it still rakes in the cash.

Android and Google’s Chrome OS are positioned as “open source” platforms, but patent litigation and licensing agreements such as this one between Microsoft and LG show that “free” sometimes comes at a cost. Microsoft is making an estimated $5 per Android device sold.

Horacio Gutierrez, corporate vice president and deputy general counsel, Intellectual Property Group at Microsoft, proclaims in a Microsoft press release, “Together with our 10 previous agreements with Android and Chrome OS device manufacturers, including HTC, Samsung and Acer, this agreement with LG means that more than 70 percent of all Android smartphones sold in the U.S. are now receiving coverage under Microsoft’s patent portfolio.”

The one remaining major player that hasn’t yet entered into a licensing agreement with Microsoft is Motorola -- which is owned by Google itself. It will be a major coup for Microsoft if it can get Google to pay a licensing fee for every device it sells using its own “free” operating systems.

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