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Microsoft gets five bucks for every HTC Android phone

Analyst spills royalty payment beans

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Buy an HTC smartphone and $5 of what you spent on it goes to Microsoft - even if you've just bought an Android device.

So says Citi analyst Walter Pritchard in a note sent out to investors today, according to Business Insider.

Microsoft announced the royalty payment deal - the result of a legal settlement - last year, but the amount the software giant receives was not made public. MS has alleged Android infringes its intellectual property, and has other smartphone vendors in its sights.

Pritchard reckons Microsoft is pursuing other Android handset makers for a royalty of $7.50-12.50 per device. HTC clearly got off relatively lightly by settling Microsoft's claims out of court.

According to market watcher IDC, HTC shipped 8.9m smartphones in Q1 - that's $44.5m straight into MS' bank account, if Pritchard is correct. That sounds a lot but it's small change compared to the $8.5bn cost of buying Skype, for example.

But if other Android vendors follow HTC, Microsoft stands to do better. Gartner, another market watcher, reckons 36.3m Android handsets shipped in Q1. That's 27.5m less HTC's contribution. At the low end of the range of royalty payments Pritchard suggests, that's $250m per quarter into MS coffers, including HTC's fees.

Take the upper end of the range - $12.50 per device and the total leaps to $388.25m.

That's based on Q1 2011 figures - almost all analysts and other observers expect Android shipments to continue increasing every quarter.

Microsoft can't be too forceful. If can't afford to overly annoy those vendors who're also selling phones based on its Windows Phone OS - they might just drop it, in a huff. Or they may trade lower royalties for a stronger commitment to WinPho - something Microsoft needs far more than even a few hundreds of millions of dollars in royalty payments. ®

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