While Microsoft Earns Extra Dough From Android, Google is Slugging it Out with Oracle

September 30th, 2011 by Trefis Team
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It’s funny how Android has turned into a cash cow for so many companies, except the one which created it — Google (NASDAQ:GOOG). Microsoft (NASDAQ:MSFT) is set to make close to a billion dollars in patent licensing revenue from Android device manufacturers, thanks to its licensing deals with HTC, Samsung and others while Apple (NASDAQ:AAPL) is currently suing HTC, Samsung and Motorola for copying the design of the iPhone and iPad, and patent infringement. Oracle (NASDAQ:ORCL) has filed a lawsuit against Google too, claiming that Google copied certain patented parts of Java in Android, including the Dalvik virtual machine. It initially demanded up to $6.1 billion from Google in damages and royalties, but has since decreased its demands to around $1.16 billion following a second round of talks.

We currently have a $40 Trefis price estimate for Oracle, which is more than 30% above its current market price. It could see some significant upside depending on how much Oracle wins in damages from the lawsuit against Google.

Oracle Could Make Billions from Android in Damages and Royalties

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Oracle is claiming $202 million for patent infringement and as much as $960 million for copyright infringement by Google. [1] Google is under fire from all sides and its $12.5 billion Motorola acquisition doesn’t seem to be helping it so far. While it is clear that Google did indeed use patented Java technology in Android, the damage estimates by Oracle and Google differ wildly. Google wants to pay only $100 million in estimates, while Oracle is demanding almost $1.2 billion.

Google is under pressure to settle soon because if the case goes to trial in October and Oracle wins, it may get an injunction to ban the sale of all Android devices in the United States. Alternatively, it may get a fixed royalty for every Android device sold, which could add up to a significant number itself. In any case, its Java related revenues will likely get a huge boost in the coming year. Tweak the chart above to see how it could affect its stock price.

The damages claimed by Oracle still aren’t exactly clear, but we should know more during the third round of talks scheduled for October 1.

Check out our complete analysis of Oracle | Check out our complete analysis of Google

Notes:
  1. Oracle seeks $1.16 bln from Google in Android case, Reuters [↩]