Microsoft Exchange Patents for Pre-installed Applications: A Strong Brush of Presence

Nanjing Hua Xun News: After Xiaomi, a Chinese mobile phone manufacturer, reached a patent license with Microsoft and pre-installed Microsoft applications such as Office Suite and Skype, Lenovo, another Chinese manufacturer, recently reached a similar agreement with Microsoft. Then the question arises, why does Microsoft frequently sign patent authorization and application pre-installation with mobile phone manufacturers recently (the two are basically bundled together)?

As we all know, Microsoft as early as 2014 on the full disclosure of the Android patents held. According to Microsoft's description, the Microsoft Android project license includes a number of Microsoft's technology patents related to smart phones, mainly covering three parts: Microsoft technology patents used at all levels of the Android operating system; Ex-FAT, RDP, EAS and other technology patents; And technology patents related to Wi-Fi and 3G/4G. This also allows Microsoft to charge Android manufacturers a large amount of patent licensing fees from these patents every year. For example, before the settlement of Microsoft's patent lawsuit with Samsung, Microsoft could have made nearly $1 billion a year in Android-related patent licensing fees from Samsung alone.

Compared with Android licensing to make a lot of money, Microsoft's own Windows Phone sales have been declining. As of last quarter, Microsoft's mobile phone shipments have plummeted to 1.9 million, with a market share of only 0.6. It can be said that Microsoft has already existed in name only in the mobile market. To make matters worse, this market share is accompanied by losses in name only. So Microsoft in the mobile market can be described as a loss of fame and fortune.

Here, Nanjing Huaxun believes that from a profit point of view, Microsoft's Android licensing should be the main source of revenue and profits in the mobile market. After all, mobile phone shipments based on Android systems are still growing, but unfortunately, This growth comes more from low-cost Android mobile phones, which is bound to affect Microsoft's Android licensing revenue. In the last quarter, for example, Microsoft's patent licensing revenue fell 27% year-on-year. From this point of view, it is inevitable that even the Android license fee, which was previously regarded as the "cash cow" of Microsoft's mobile market (revenue and profit are even greater than their own Windows Phone), will be reduced. In spite of this, Microsoft still hopes or must stay in the mobile market under its CEO Nadella's "mobile first" strategy. However, in the face of the loss of fame and wealth of its own Windows Phone and the decline of Android license fees, which are beneficial to the unknown, the only way is to further sacrifice the Android's profits (for example, for the authorized Android manufacturers to reduce the authorized patent fees by pre-installing their own applications), get more of your own Office suite and apps like Skype pre-installed on Android vendors' mobile devices, such as smartphones and tablets.

In fact, Microsoft has been trying to bundle the Android license fee with the pre-installation of its own applications, but it is not as tight as it is now. However, the reason why it is so close now is that the above-mentioned Windows mobile phones are basically on the verge of disappearing in the mobile market. Android the license fee is declining day by day, the only thing that makes Microsoft have a sense of presence in the mobile market is Microsoft's own application in Android mobile phones. That is, pre-installed with patent authorization for application. So the question then is, what will happen in the end?

The industry knows that since Nadella became the CEO of Microsoft, he has always emphasized Microsoft's advantages in productivity software in the mobile market, so Microsoft's Windows phones have always adopted the strategy of pre-installing Office and other software. However, from the perspective of promoting the sales of Microsoft phones, instead of playing a positive role in promoting the sales of Microsoft phones, the sales volume has been declining, which seems to prove that in the mobile market (such as smart phones), applications such as Office are not just needed by mobile phone users. As Microsoft opens such applications to rival platforms (Android and iOS), this "advantage" that is not just needed has been discounted, and it can no longer be called an advantage.

In this sense, manufacturers who cooperate with Microsoft (with the reduction of Android patent fees to allow Microsoft to pre-install its own applications on its own mobile terminals) may not make their mobile phones in the competition because of pre-installed Microsoft applications. Achieve a substantial differentiation advantage. In other words, the recent patent licensing and pre-installation cooperation between Lenovo, Xiaomi and Microsoft is more like a "strong buy and sell" of Microsoft ". This is somewhat similar to Microsoft's push to pre-install Windows10 in the PC market. It's just that the free Windows10 here has become a reduction in the Android license fee.

To sum up, Nanjing Hua Xun believes that Microsoft's frequent signing of patent authorization and application pre-installation with mobile phone manufacturers recently is a helpless move for Nadella's "mobile first" strategy under the general trend of failure of Microsoft's own mobile phone business and reduction of Android authorization fees. And this sense of presence will not have a substantial impact on Microsoft or the mobile phone manufacturers it cooperates with in their respective markets.