eTeknix reports that even though Microsoft's mobile attempts aren't gaining any traction, the company is still doing quite well in this market thanks to the royalties the company earns from Android device. Microsoft earns royalties on around 70 percent of Android devices that are sold worldwide. On average, the software giant makes about $5 per Android device sold by firms like HTC, Acer, ViewSonic, Samsung, LG and Barnes & Noble. Analysts estimate around 95 percent of this revenue is pure profit for Microsoft.
This $5 is made up purely of patent royalties. It isn’t specifically disclosed which patents Microsoft use to generate this revenue but one thing is for sure, with the acquisition of Nokia’s handset division earlier on this year Microsoft accumulated a large number of additional patents it can apply to the smartphone market and we will no doubt see Microsoft vigorously enforce those to continue reaping the rewards from Android’s success.
Business Insider writes the royalties hide the fact that Microsoft's mobile and Xbox groups are bleeding 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.
Sherlund believes Microsoft needs to spin out Xbox. He sees it as an orphan group at Microsoft that doesn't really fit with anything it's doing.