back to article How did Microsoft get to be a $1.2bn phone player? Hint: NOT Windows Phone

Patents, not the next Angry Birds or having the best camera, are helping Microsoft tidy up in smartphones. The amount of money Microsoft made on smartphones grew in 2012, but this was largely thanks to Android rather than Windows Phone. In its latest SEC filing, Microsoft said Windows Phone revenue increased by $1.2bn in the …

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  1. Russ Tarbox
    Joke

    Couldn't help it...

    "...having gone from Android device maker to Android device maker "persuading" them to sign up."

    Just made me think of the episode of the Simpsons with Bill Gates ... "Buy him out, boys!". Same persuasion techniques?

    1. jmk89
      Thumb Up

      Re: Couldn't help it...

      "We can't figure out what...if anything...an-droid actually does, so rather than risk competing with you, we've decided simply to buy you out"

    2. Anonymous Coward
      Anonymous Coward

      Re: Couldn't help it...

      "Microsoft's model has been less court action, more a quiet word in the ear, as the company's spent less time in the courts in its path to rounding up Android device makers."

      Which means Microsoft must have a very very strong patent portfolio in this space - companies like Samsung don't simply roll over and cough up...

      1. JDX Gold badge

        Re: Couldn't help it...

        I think so too. Granted MS are a massive company with big legal guns who would terrify most under their gaze, but the companies who have signed up include some other real heavyweights. Samsung in particular is not exactly averse to spending $millions on lawsuits so this does suggest there is a real case here.

  2. Anonymous Coward
    Anonymous Coward

    It's not just numbers of apps, increasingly it's the depth of quality of apps. iOS and Android apps have been maturing month on month, year on year. If you now switch platform, but find the apps are missing the features you have got used to, you are going to be pretty pissed off. For example if there is no maps app with the transit directions you are used to, or notes app with PDF scanning and OCR when that is part of your office workflow, or if you want to watch an episode of that BBC drama on that flight you are about to catch, but find you can't download as well stream in iPlayer, or, or, or... the list is now long and extensive.

    1. FredBloggsY
      Facepalm

      "If you now switch platform, but find the apps are missing the features you have got used to, you are going to be pretty pissed off."

      That's the other side of the "1,000,000 apps on our platform" mantra. For ~20 years you could make a document or spreadsheet, send it to pretty much anyone, anywhere, and they'd be able to read / change / return / use it. Try doing that with apps.

      This obvious problem for much business use seems to have been overlooked by many in the gimme-a-mobile-device feeding frenzy. Apart from some simple web stuff and a few emails (if you're not concerned about ubiquitous spelling 'corrections'), keyboardless glass slabs are primarily a social media "consumption" device with little more interoperability than a house with every plug socket being incompatible with every other. Doesn't matter two figs what the "depth of quality" of any particular socket is, it's still going to p*** you off when you have to move stuff around.

      1. Antonymous Coward
        Windows

        @FredBloggsY

        You know there's an Office365 app for Android? If you like that sort of thing.

        https://play.google.com/store/apps/details?id=com.microsoft.office.officehub

        1. Adrian 4 Silver badge
          Facepalm

          Re: @FredBloggsY

          Who'd bother with that when it's so easy to import and share stuff on google drive ?

          We've all had enough of chasing Microsoft's 'compatibility' game. Or, rather, their forced upgrade schedule.

    2. Anonymous Coward
      Anonymous Coward

      "example if there is no maps app with the transit directions you are used to, or notes app with PDF scanning and OCR when that is part of your office workflow"

      Interesting ones to pick - as both of those are actually significantly better than the competition on Windows Phone. Nokia Drive is hands down the best navigation app on any mobile platform, Nokia Maps is the best maps app - and the Integrated OneNote is the best of breed for note capture, OCR, audio to text, etc, etc....

  3. Mike Brown

    The wierd thing is that no one is fighting. Its either cast iron, or so complex it would have both parties in court for decades.

    I wish someone would fight it tho. Apart from barnes and noble, they dont count....

    1. Antonymous Coward
      Go

      Microsoft seems unwilling to rise to any form of fight/test/disclosure whatsoever. Canonical told the fuckers exactly where to stick it. No lawsuit ensued. In fact, methinks the MS protection racket alone goes a very long way to explain the sudden Unity/HUD revolution. Could Microsoft's loudly publicised, yet simultaneously top secret, patent minefield portfolio be little more than a load of "design" crud related to the Win95 UI... all on the cusp of expiry anyway?

      1. Anonymous Coward
        Anonymous Coward

        "Canonical told the fuckers exactly where to stick it"

        To be fair, they have to be making enough money to be worth suing...

        1. Antonymous Coward
          Coffee/keyboard

          To be fair, they have to be making enough money to be worth suing...

          That's bollocks RICHTO as well you know. Microsoft has to defend these purported "patents" from everyone. In approaching Canonical, Microsoft demonstrated awareness of Canonical's various Linux interests and asserted that they infringe the secret patents. When Canonical replied "fuck off" Microsoft was left with only two options. 1. Litigate. 2. Default. Microsoft appears to have chosen 2.

          In not actively defending its assertions Microsoft has itself invalidated them... and not just for Canonical... if they're not valid against Canonical, they're not valid against anyone not Samsung, not Apple, not Google. The law is very clear on this: Use it or lose it M$.

    2. Charles Manning

      There is some fighting, but it is easier to give in.

      Well at least Moto (now Google) fought back and won against some of the patents.

      But most companies just treat it as protection money. If you didn't pay the five bucks (or whatever it was) then you had the strong possibility of MS having your products held up at customs or being taken off the shelves for long enough to miss a key sales period like Christmas or screw up a product launch.

      These court cases go on forever (years and years). Nobody wants their products and revenue under threat for that long. In the end it is just a lot easier to let MS take your lunch money and get on with life.

    3. P. Lee Silver badge

      >The wierd thing is that no one is fighting. Its either cast iron, or so complex it would have both parties in court for decades.

      3rd Option: Not signing threatens some other MS-dependent revenue stream / cooperative venture.

      Really, Samsung? You don't want your drivers included on the Windows DVD? Ahem Foxconn, we are currently looking for an xbox manufacturer...

  4. Shagbag

    Google paying royalties?

    The last time I looked, Google told MSFT to go away and stop annoying them.

    Out of all these so called 'protection money' agreements I do find it curious that it's always MSFT that announces them. The silence from everyone else coupled with the refusal of some (Google, Red Hat, et. al.) and the total absence of litigation, leads me to conclude that something is not right with MSFT's continued crowing about these.

    History will tell, but I would not at all be surprised if it turns out to be a case of The Emperor's New Patent Portfolio. As we have seen with Apple v Samsung, the issuing of a patent by the USTPO says absolutely nothing about its legal enforceability. That case has also shown how incredibly expensive such US litigation is. While you are threatened by a company the size of MSFT and the $$$ cash resources it has, it is no wonder that a CEO decides it is better to pay them off and be done with it rather than go through an expensive circus trial like Apple v Samsung. Maybe that's the reason why most relatively big companies have refused.

    1. Flocke Kroes Silver badge

      My guess

      Last year, it could have been "pay for these invalid patents or you cannot distribute Windows". Next year, it will be "pay us back or we won't distribute Windows".

      1. Antonymous Coward
        Pint

        Re: My guess

        Next year, it will be "pay us back or we won't distribute Windows".

        That'd certainly level the playing field!

        Thanks for the happy (even if somewhat optimistic) thought.

    2. Anonymous Coward
      Anonymous Coward

      Re: Google paying royalties?

      "The last time I looked, Google told MSFT to go away and stop annoying them."

      Google lost in court actually. But Microsoft don't go after Google for money at the moment because you have to be able to prove damages. And Google don't sell Android - they give it away. So Microsoft goes after the handset vendors and manufacturers that do sell Android, because then you can prove a potential loss of patent revenue...

    3. Anonymous Coward
      Anonymous Coward

      Re: Google paying royalties?

      Although both Apple and Microsoft use their patent portfolio as a tactical weapon, they have different goals.

      Apple is selling millions of iDevices, so naturally, they'd want a competitor who...shall we say...has drawn some inspiration from them to be punished. That's what the patent war between Apple and Samsung is all about.

      Microsoft has no turf to protect, so they are making lemonade. Maybe they couldn't sell a phone to a sixteen year old, but at least they can get their pound of flesh from the ones that can.

      1. Tom 13

        Re: Maybe they couldn't sell a phone to a sixteen year old

        In all fairness, these days I expect it is a bit more difficult to sell a cell phone to a 16 year old than a 60 year old.

    4. Anonymous Coward
      Anonymous Coward

      Re: Google paying royalties?

      But Samsung *has* licensed MS patents, and they're the biggest Android manufacturer by far, and certainly the most profitable.

      LG, Sony and HTC too.

      Which are the 'relatively big' companies you've referred to who have refused? As far as I am aware, these are the biggest Android manufacturers and they've all signed deals with Microsoft.

      1. Anonymous Coward
        Anonymous Coward

        Re: Google paying royalties?

        "But Samsung *has* licensed MS patents, and they're the biggest Android manufacturer by far, and certainly the most profitable.

        LG, Sony and HTC too.

        Which are the 'relatively big' companies you've referred to who have refused? As far as I am aware, these are the biggest Android manufacturers and they've all signed deals with Microsoft."

        Of which HTC and LG both sell WP devices. They also would want to keep their options open about tablets as well. Sony and Samsung sell tablets as well as computers; so they would need to license Windows and not paying royalties for Android would cause Microsoft to increase the license price for Windows.

    5. sorry, what?
      Unhappy

      Collective defense?

      I wonder when the law will be such that companies can group together for a "class act" type defense against giant (and other) patent trolls and patent wavers? Never, I suspect.

      The company I used to work for got trolled over WAP Push and had to roll over because it was just too small to stand against the troll. It's pretty disheartening.

  5. joeW
    Mushroom

    A more reasonable approach

    Given Samsung's runaway success, I can't help but wonder if Apple are silently kicking themselves now. Imagine if instead of launching a "thermonuclear war" of lawsuits back in 2009, they'd followed MS's approach of a quiet word in the ear, a reasonable fee per Samsung unit sold, maybe a bit of patent cross-licensing?

    1. 100113.1537
      Thumb Up

      Re: A more mature approach

      I agree whole-heartedly. Apple and Samsung saw their patent war as a way to attack each other instead of what the patent was actually for - a way to get a return for your investment in research.

      This is what patents are used for everywhere else - cross-licensing deals abound in all mature industries. It is only in the land-grab of a new technology that people use patents as an exclusion zone.

      Maybe Windows originally through they could screw Android over and get their own 'phones out, but since that was not happening, why not make some money anyway? The other side of this is that they probably do have some good IP in there (they have been doing this for a while after all - even if only by buying up other companies) and so if I am making a phone and I want their technology, a $10 bucks per unit license is not a big deal until I can invent around it (or the patent runs out).

  6. User McUser

    "it's just a handful of apps that customers really want and are eager to use."

    I agree. All I ever wanted from a smartphone is an Internet connection with Web, Email, and SSH apps. The rest is either fluff or nice to have, but not required.

    1. monkeyfish

      All I ever wanted from a smartphone is an Internet connection with Web, Email, and SSH apps.

      But not a phone, apparently.

      1. User McUser
        Thumb Up

        "But not a phone, apparently."

        Actually, you're correct. I never owned a cell phone prior to getting a friend's used iPhone in 2009 and I make less than 10 minutes worth of voice calls a month. I would get data-only service if I could.

  7. Eddy Ito Silver badge

    "You can't sell a phone without the apps, you just can't."

    It also seems that given that so many of those apps are games you can't sell a game console either given the interest shown in the latest units.

  8. John Smith 19 Gold badge
    Unhappy

    Isn't patent farming the usual start of the decline of a corporation? I'm thinking Kodak

    of course.

    1. Anonymous Coward
      Anonymous Coward

      Re: Isn't patent farming the usual start of the decline of a corporation? I'm thinking Kodak

      Maybe a better example would be SCO.

  9. xperroni

    If you can't beat 'em, sue 'em

    Fun fact: I remember a piece from a few years back, which reasoned Microsoft would never take the litigation route against their rivals. It argued that since IBM did this very thing to them back in the day, Gates & Co. would know just how frustrating it is for a company competing on product quality* to be stifled by a larger player throwing its patent portfolio around.

    Alas, they fought monsters...

    * I know, MS, product quality – I didn't say their reasoning was sound.

  10. Neil Lewis

    Oh the irony.

    Didn't MS build a twenty-year desktop monopoly on the back of having the applications people were used to running on Windows? It used to be that whenever Joe Public thought about switching to Linux, the main thing putting them off was not being able to run MS Office/Photoshop/AutoCAD or somesuch 'must have' program. Now the shoe's on the other foot.

    1. Grikath Silver badge

      Re: Oh the irony.

      "Used to be"? You mean "it is still the case", surely.

      Like it or not, open source applications , for many reasons, still lag in useability and features comapred to propietary/industry standard aoolications.

      1. joeW

        Re: Oh the irony.

        Whoever downvoted you has never tried to use the GIMP for professional work.

  11. Jess

    Seems to support what I suspected.

    Killing Symbian was a win-win (Win) scenario.

    Nokia lose most of their smartphone Market to Samsung, they earn new royalties. Nokia don't and they sell Win Phones.

    As it is it seems like Nokia has retained perhaps a third of it's Symbian market and cannibalized about half of the existing WinPho market.

    I suspect why so many companies pay the royalties is MS probably have a couple of important and robust patents among the portfolio, along with a load more shakey ones. They probably do a big discount on the portfolio, so you would have to invalidate quite a lot of patents for it to be worth only buying the sound ones, making not worth the effort.

    1. monkeyfish

      Re: Seems to support what I suspected.

      Also, I think if Nokia ad held on the Symbian/Meego they could have cleaned up right now. What with them being being a non-US OS and all.

  12. This post has been deleted by a moderator

    1. Anonymous Coward
      Anonymous Coward

      Re: All of the Microsoft patents are bogus.

      If you're not joking, you need to get a grip, go outside and interact with real people. You should have gone to the pub - it was 9pm when you wrote that.

  13. Cyfaill
    Linux

    Software Patents are weapons of war

    Microsoft uses these like a battle hammer.

    If you can't beat them with something legitimate like innovation of something real. Then beat them to death with the attrition of the cost of lawsuits or let them barely survive to pay you off..

    Nothing personnel... if they won't play ball, we will just break all of the cartons of milk or beer or what ever this mafia of Microsoft wants to.

    How do I know Microsoft does not have legitimate patents... if they were real then Microsoft would have a real system to use... they don't.

    Its all a fake, Microsoft bluffs with its hammer in hand.

  14. Graham Marsden
    Pirate

    How to make money...

    ... Don't Innovate, just Litigate!

    1) Come up with a ridiculously broad or blatantly obvious idea

    2) Patent it (the USPO will let it go through on the nod) and stick it in a drawer

    3) Wait for someone to create a product that uses an idea which is something close enough to it

    4) Threaten to sue unless they pay you Protection Money (you've most likely got deeper pockets, they'll probably cave first)

    5) PROFIT!!

  15. Anonymous Coward
    Anonymous Coward

    "In its latest SEC filing, Microsoft said Windows Phone revenue increased by $1.2bn in the year to 30 June, 2013."

    I think the SEC needs to start a probe of Microsoft. If they are putting patent royalties under a different category, that could be considered filing false information. I think the SEC needs to take a look. If Microsoft used a different category name other than Windows Phone, then they would be in the clear.

  16. PaulR79
    FAIL

    MS failing themselves but also partners

    The more they drag their feet with updates and new features the harder it gets for companies like Nokia, HTC, Samsung etc to get any value and sales from WinPho. I own an HTC 8X and it's a great phone but I've not seen a single update that added anything worthwhile. Looking at the Nokia Lumia 1020 I would really love to own that phone too but there is no point. The camera is very, very impressive but the OS is still the same stagnating mess it was when they launched it to much..... er..... moderate fanfare last year.

    MS are still trying to run WinPho the same as they do other products like Windows and XBox with a few releases over a long period of time but that won't work here as their competitors are moving at a far faster pace. MS aren't just behind they're being left further and further behind all the time. When is the next WinPho update, does anybody know? Does anyone have any clue what will be included apart from a few tweaks and bug fixes? It's hard to care about something when the people behind it don't seem to give a shit.

    Lots of early adopters got burned with WP7 devices and any that took a gamble by going to WP8 after that are probably thinking they made a huge mistake. MS need to wake up and either push WP8 hard or just can it. Any other course of action is just, to be blunt, fucking around with anyone that tries to support it.

    1. Anonymous Coward
      Anonymous Coward

      Re: MS failing themselves but also partners

      July 2014 is end of support for WP8 ; so 11 months from now. So there will be an "update" between now and then.

  17. Barnie

    Extortion - time for the oft to get involved in the UK?

    I don't know about anywhere else but I certainly think its time that these deals are subject to scrutiny in the UK, Microsoft are using a Monopoly in some Markets to unfairly distort another. How much is added to the cost of a phone (or contract is some instances) due to Microsoft bullying.

    1. Nigel 11
      Devil

      Re: Extortion - time for the oft to get involved in the UK?

      Ten dollars, or even fifteen, per smartphone, is hardly serious distortion of a market where customers pay twice that per month.

      The far greater Microsoft monopoly abuse scandal is the way they have made it all but impossible, for very many years, to buy a PC and reclaim the full cost of the Microsoft Windows license which isn't wanted by people who run Linux. Yes, it' s possible to buy a PC without Windows in a few places, but it's hardly ever any cheaper, let alone as much cheaper as the known cost of a Windows OEM license! £50 per £400 PC is a far greater "tax" than $15 on a phone, and has far less justification.

      1. Tom 7 Silver badge

        Re:Re: Extortion - time for the oft to get involved in the UK?

        $10 to $15 dollars is a lot on a $50 dollar phone. I dont know if you've seen what you can do with a $50 dollar phone - a lot more than you can do with a windows PC with office on it!

      2. Anonymous Coward
        Anonymous Coward

        Re: Extortion - time for the oft to get involved in the UK?

        Before putting all the blame for that on MS, keep in mind that companies pay to get their bloatware on new PCs. As most of that bloatware is not available on Linux, the OEM isn't going to be paid to put it on a Linux machine.

  18. 0_Flybert_0

    Optional

    "allowing Samsung or Apple stumble as they inevitably must"

    a. Apple stumbles .. Samsung picks up market share .. oh wait ..

    b. Samsung stumbles .. other Android makers gain market share

    c. Windows Phone might as well be named Stumbles Phone

    d. don't think a savvy strategic business plan would normally presume one or more competitors will stumble

    oh .. Microsoft doesn't sue Google because Google now owns Motorola's 17,000 patents ..

  19. TTH

    How long are MSFT's Android-related patents valid for? FAT32 patents are filed in 1990's and common patent time is 20 years. What after that? Gaining mobile market share is of essence to MSFT, patent leeching related revenue is not going to last.

    Without competitive app catalogue WP should be targeted as an option for feature phone buyers. WP's simple UI can be easily adopted. Price range for WP devices should be 50-200$. After gaining significant market share (15-20%) app problem should fix itself pretty quickly. MSFT has made huge mistakes in both designing and marketing WP, complete restructure of WP development and marketing should be made ASAP. Merger with MSFT WP-unit and Nokia Device-unit is the best way to go.

  20. Sirius Lee

    The Microsoft bashers and IP freetards just can't help themselves. The usual complaint about the existence of IP is when it is used by trolls 'who don't produce anything'. In Microsoft's case, they've been in the mobile phone business for 2 decades and actually produce things - even things to do with mobile devices. And because they've been in the business for years longer than either Apple or Google or Samsung (Samsung used to produce phone to order not on its own account) they've given thought to the software needs of the mobile device and patented them.

    So what's the complaint in this article? It seems to be that because Microsoft is not the market leader they are should not allowed to benefit from the patents they applied for and were granted a long time before Google even contemplated a mobile operating system. That because Microsoft has only 5% market share it's years of research into and development of mobile device features it should be denied the legal benefits of its work.

    My guess is that the biggest contributor to Microsoft's licensing income is Apple. In my view Apple have been innovative in their marketing but have few technical innovations. From what I can tell Apple innovation appears to be limited to rounded corners. So it gladdens my heart that the fanbois are probably substantial contributors Microsoft's fortunes.

  21. Anonymous Coward
    Anonymous Coward

    From the article:

    "and signing up carriers who populate the markets"

    Except that MS charge for carriers (I think you mean manufacturers here) for Windows per unit install, where as Android, FF OS and Ubuntu Touch makers will not charge for it. They just charge for enterprise support or you can add your own developers to the code base (note: they only let the bog boys make changes, it's not pure play open).

    So, a manufacturer has to ask what do they get for this extra charge? And the answer is actually less support (less updates on features and fixes per year and no capability to add to the product o/s for features they need earlier than the roadmap).

    Thus they are asked to pay for something that gives them a worse deal than is on the market and only benefits MS who may then later create their own phone to challenge them.

    No wonder that most manufacturers only entertain MS for a few models so, as to keep their patent trolls happy as part of the overall deal. They really only have Nokia and Nokia does not even rate the deal as stated in the article.

    MS won't make a success of WinPhone, it's DOA. And the manufacturers have already moved on just like they did with WinRT. Another EPIC fail.

    1. Anonymous Coward
      Anonymous Coward

      "Except that MS charge for carriers (I think you mean manufacturers here) for Windows per unit install, where as Android, FF OS and Ubuntu Touch makers will not charge for it."

      Android may be free to manufacturers, but the Google Apps (GMail, Play Store, etc.) aren't. I don't think any of the major manufacturers would ship a phone without those.

      "less updates on features and fixes per year"

      Most manufacturers rarely (if ever) update Android devices anyway, so this isn't really a disadvantage from their perspective.

      I'm not an MS fanboy, BTW, I just hate bad information.

  22. TomMariner

    Apples approach to IP

    Microsoft's behind the scenes approach to earning their patent revenue is in stark contrast to Apples public, ego-filled, try to kill the competition actions.

  23. Jim 59

    How did Microsoft get to be a $1.2bn phone player?

    Er... buy riding Nokia to the point of near-ruin ?

  24. Aoyagi Aichou

    Beyond me

    What I don't understand is how can anyone "defend" WP8. How exactly is it better than iOS? For either users or devs?

    The problem is not the lack of *spit* "apps", it's the OS itself. I seriously doubt Nokia has the ability to change MS's views on their business plans or practices, especially with Stephen "TrojanHorse" Elop...

  25. h3

    There is nothing wrong with Windows Phone 7.8 for me. It is good that that there is no crappy apps that do stuff in the background. I spend less time looking for stuff that I end up not using anyway.

    The WP7 keyboard is better than any other. (It is easy to use accurately even when you are absolutely wasted).

    I play dodonpachi a bit and it work properly unlike the Android version of it.

    Tablets are different. From iOS 7 when it supports a proper controller I think it might be worth it for me. (Just because the stuff on XBLA that I want to buy I think is more likely to be moved to iOS than anywhere else - I never bought a 360 - But I want to play guardian heroes at some point - And the ipad being 4:3 like the Saturn is obviously going to be an advantage).

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