This is like two juicy news stories in one … the first being that Microsoft has successfully leveraged its patent muscle and is earning a massive $2 billion annually from Android patent royalties across a range of handset makers, and the other is that huge operating losses from Xbox and Windows Phone consume all of that profit and more!
According to a report from Business Insider, Microsoft earns $2 billion per year in revenue from Android patent royalties – and has about an 85% profit margin on those earnings! So for all of the efforts their legal team put into getting per-phone royalties … it all heads to their bottom line.
From the article:
This money, says Sherlund, helps Microsoft hide the fact that its mobile and Xbox groups are burning serious cash.
Sherlund says that if you back out the Android profits, Microsoft is probably losing $2.5 billion on Skype, Xbox, and Windows Phone. Of that, $2 billion in losses are attributable to the Xbox platform.
Investors are blind to Xbox’s struggles, says Sherlund, because they are “concealed by the hugely profitable Android royalties.”
Looking at those numbers makes me wonder if Apple wouldn’t have been better off taking the same approach – imagine if they were also grabbing $10 off of every smartphone Samsung was selling!