Microsoft's IP licensing revenue continues to decline due to increase in sales of low-end Android devices

This week, Microsoft reported that revenue in More Personal Computing grew 1% (up 3% in constant currency) to $9.5 billion, for the quarter ended March 31, 2016. Windows OEM revenue declined 2% in constant currency, outperforming the PC market, driven by higher consumer premium device mix.

Microsoft Technology Licensing offers a Intellectual Property (IP) licensing program that provides broad coverage under Microsoft’s patent portfolio for certain devices running the Android platform. Almost all of the major Android OEMs have signed this patent licensing agreement with Microsoft.

Microsoft noted during their earnings call that IP licensing revenue continued to decline, impacted by both a decrease in total unit volume of Android devices and a higher mix of lower-end Android devices. This is not surprising given the fact that we are seeing lots of high-value, low-cost Android devices in the recent past from many Chinese OEMs. Due to increase in low cost Android device sales, Microsoft’s royalty percentage is also going down. Microsoft IP team will be hoping to see premium Android OEMs like Samsung and LG to step up their game against Apple to capture more high-end smartphone market.

Do you think Android OEMs can compete against Apple in the high-end smartphone market? Let us know your views in the comments section below.