Microsoft Signs LG Patent Deal, Collects on 70% of All Android Devices

Microsoft (NASDAQ:MSFT) announced that it has entered a patent licensing agreement with LG which covers all Android and Chrome OS based devices manufactured by LG. ^[1] With this deal, Microsoft has entered patent licensing agreements with every major Android device manufacturer except Motorola (NYSE:MMI). It now gets a patent licensing fee of around $5 to $10 for around 70% of all Android smartphones sold in U.S. Microsoft’s own Windows Phone smartphone platform competes with Google‘s (NASDAQ:GOOG) Android and Apple‘s (NASDAQ:AAPL) iOS. Microsoft stands to generate billions of dollars in revenue from Android patent licensing in the coming years, given that Android is the top smartphone platform, selling hundreds of millions of devices every year.

Check out our complete analysis for Microsoft

Horacio Gutierrez, corporate vice president and deputy general counsel, Intellectual Property Group at Microsoft, said:

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We are pleased to have built upon our longstanding relationship with LG to reach a mutually beneficial agreement. 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. We are proud of the continued success of our program in resolving the IP issues surrounding Android and Chrome OS.

Motorola is now the only major smartphone manufacturer which hasn’t signed a patent licensing deal with Microsoft. Since Google recently acquired Motorola, it is unlikely that it will give up without a fight. Microsoft has sued Motorola, and recently won an initial ruling by the International Trade Commission, which stated that Motorola did infringe on one of Microsoft’s patents.

We expect Windows Phone to pick up steam in 2012, following a great showing at CES 2012, but for the near future, Android will continue to generate more revenue for Microsoft than Windows Phone. Ironic, eh?

We have a $32 Trefis price estimate for Microsoft, which stands nearly 15% above its current market price. Windows Phone, Xbox and other devices account for 8% of its total price estimate.

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1. Microsoft and LG Sign Patent Agreement Covering Android and Chrome OS Based Devices, Press Release [↩]