While it might seem reasonable to assume that Company A makes more money from sales of its own product than from those of its competitor, Company B, thanks to the magic of licensing, it’s actually possible for the reverse to be true, especially if Company B has a much larger market share. Spoiler alert: Company A is actually Microsoft, and Company B is actually Google, and the products are Windows Phone and Android, respectively.
According to Citi analyst Walter Pritchard, to date, Microsoft has actually made five times as much money from Android as it does from Windows Phone. Here’s how the math works:
A rough estimate of the number of HTC Android devices shipped is 30 million. If HTC paid $5 per unit to Microsoft, that adds up to $150 million Android revenues for Microsoft.
Microsoft has admitted selling 2 million Windows Phone licenses (though not devices.) Estimating that the license fee is $15/WP phone, that makes Windows Phone revenues to date $30 million.
Does that mean Microsoft should just give up and concede the mobile market to Google? Absolutely not: Most analysts agree that the smartphone market will be much bigger five years from now than it is today, so fighting for that market share still matters.