Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
This Past Week in Gold - 24th Oct 16
Can Gold Continue To Rise, Since The Usd Is Moving Higher Too? - 24th Oct 16
Why are Americans Avoiding the Stock Markets; Fear or Lack of Money? - 24th Oct 16
The US Is NOT a Low-Tax Jurisdiction - 24th Oct 16
Stocks, Crude Oil and EURUSD Trend Forecasts - 24th Oct 16
Stock Market Another Month to Go? - 24th Oct 16
Large Sell-off in Stock Market Looming - 24th Oct 16
Ungovernability - 24th Oct 16
Stock Market Boredom Before The Storm - 24th Oct 16
Establishment Mainstream Media Elite Buys US Election for Hillary Clinton, Time Running Out for Trump - 23rd Oct 16
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Mobile Computing Patent Wars Could Cost Google $2 Billion Annually

Companies / Google Jul 19, 2011 - 09:33 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDavid Zeiler writes: A mobile computing patent war launched by powerful tech rivals could snatch revenue away from Google Inc.'s (Nasdaq: GOOG) Android platform - and possibly threaten its viability as a free alternative operating system.

The threat to Android endangers as much as $2 billion in annual revenue for the search titan.

Google's rivals - which include such tech giants as Microsoft Corp. (Nasdaq: MSFT), Apple Inc. (Nasdaq: AAPL) and Oracle Corp. (Nasdaq: ORCL) - have filed 48 patent infringement lawsuits against the Mountain View, CA company and many of its hardware partners.

Google rarely countersues, the most common way of battling patent lawsuits, because of its relatively paltry patent portfolio. Google has only about 700 patents, compared to about 4,000 for Apple and more than 17,000 for Microsoft.

So it stung particularly badly when Google lost the most recent patent wars battle by failing to win the auction for bankrupt Nortel Networks Corp.'s (PINK: NRLTQ) 6,000 patents earlier this month.

Instead, a consortium of its mobile computing competitors - Apple, Microsoft, Research in Motion (Nasdaq: RIMM), Sony Corp. (NYSE ADR: SNE) and LM Ericsson (Nasdaq ADR: ERIC) - won the Nortel patents with a bid of $4.5 billion.

"In the patent wars that are raging in the mobile computing world, this could turn out to beGoogle's Waterloo," observed The Financial Times.

U.S. and Canadian judges approved the Nortel sale at a joint hearing July 11.

"Googlelost an unprecedented opportunity to acquire a major bargaining chip that would strengthen it at the mobile industry's intellectual property negotiating table," Florian Mueller, an intellectual property analyst and blogger, told Computerworld. "I'm afraid it won't get a similar opportunity in quantitative and qualitative terms anytime soon."

Threat to Revenue
Although most of Google's profits still come from search, it has invested in ventures like Android to sow the seeds for future revenue growth. But with Google faring badly in the patent wars, revenue from Android may fall far short of expectations.

According to research done earlier this year by Piper Jaffray Companies (NYSE: PJC) analyst Gene Munster, Android generated about $5.90 per user for Google in 2010. That translated to $130 million last year, assuming 22 million users, with the money primarily coming from mobile advertising. Google provides Android itself at no charge.

But Munster's projections show how Android could become a source of much fatter profits. Back in February he estimated Android revenue growing to $9.85 per user in 2012, and growing to 133 million users for revenue of $1.3 billion.

But Android adoption already has exceeded Munster's projections. Google said last week it has 135 million users right now, and new activations are running at a rate of 500,000 per day.

At that rate, Android would have 220 million users by January of 2012, which would push Google's annual mobile revenue past $2 billion. While that's only about 5% of Google's total annual revenue of $36 billion, it does represent revenue from a fresh source.

With Android such a big piece of Google's business strategy, you'd think the company would have done more to defend its intellectual property (IP).

In fact, the Nortel battle was supposed to be Google's counterstrike. The company's "stalking horse" bid of $900 million was thought by most observers to assure Google of victory and give it the ammunition it lacked in the patent wars.

And at first it appeared Google would prevail - it was up against Apple, Intel Corp. (Nasdaq: INTC), and the consortium led by Microsoft. In the fifth and sixth rounds of bidding, however, the players reorganized - Apple joined Microsoft's consortium and Intel partnered with Google.

It was a high-stakes faceoff between the deepest pockets in Silicon Valley, and Google blinked first.

Avalanche of Lawsuits
The loss of the Nortel patents means Google and its hardware partners can look forward to more lawsuits.

Microsoft has led the way so far, successfully suing HTC Corp.n (OTC: HTCXF) and four other smaller companies to extract fees ranging from $5 to $12.50 per handset. Suits against Motorola Mobility Holdings Inc. (NYSE: MMI) and Barnes & Noble Inc. (NYSE: BKS) are pending, and Microsoft is demanding similar fees from Samsung Electronics LTD (PINK: SSNLF).

Oracle, citing patent violations of the Java software it acquired with Sun Microsystems last year, has filed a suit directly against Google as well as against numerous handset makers, from whom it is seeking licensing fees as high as $20 per unit. The Google suit seeks damages "in the billions of dollars."

Apple has sued Samsung, Motorola and HTC, although Apple seems to be more interested in killing its rival's products than extracting licensing fees.

A key goal of the patent wars is to reduce the appeal of Android to the handset makers.

Microsoft, for example, will happily sell a Windows Phone 7 license to a handset maker for a mere $5 to $10 per unit, less than what it likely will cost to pay an array of Android patent licensing fees. And Microsoft indemnifies its licensees against any future patent disputes.

Microsoft is betting most handset makers will adopt Windows Phone 7 as a less expensive and less risky option.

And don't forget how those licensing fees could add up for Microsoft and Oracle (and Apple, if they decide to hop on that bandwagon). Some believe Microsoft could end up with as much as $1 billion in annual Android patent revenue - money that's virtually pure profit.

Although Android has yet to feel the impact of the patent wars - it has quickly grown to run 40% of all smartphones sold - Google's arrogant attitude towards IP and inability to win any battles have placed the innovative operating system in serious jeopardy.

"[Google] had this combination of thinking patents were from the devil, while they were on a mission from God," Ron Laurie, managing director of Inflexion Point Strategy LLC, told Bloomberg News. "After getting attacked so often, they started getting it."

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife