Google Groans as Microsoft Strikes Samsung Licensing Deal

September 29th, 2011 by Trefis Team
-7.25%
Downside
196
Market
182
Trefis
GOOG: Alphabet logo
GOOG
Alphabet

Samsung smartphones based on Google’s (NASDAQ:GOOG) Android will be slightly less profitable as Microsoft (NASDAQ:MSFT) recently announced a patent licensing deal with Samsung. [1] With patent lawsuits widely believed to be the driving force behind Google’s acquisition of Motorola Mobility (NYSE:MMI), the online search advertising giant can’t be happy about the fact that another one of its Android partners has to shell out licensing fees to Microsoft that in turn could limit Android’s own reach and line the pockets of a major competitor. Google competes in the mobile operating system (OS) market primarily with Apple (NASDAQ:AAPL) and increasingly with Microsoft.

We currently have a price estimate near $600 for Google’s stock, which is roughly 11% above the current market price.

Relevant Articles
  1. What Google Quantum Breakthrough Means For Its Stock
  2. What’s Next For Google Stock
  3. Pick Google Over Amazon?
  4. Should You Pick Alphabet Stock At $170?
  5. Waymo Is Worth $5 Trillion For Alphabet Stock
  6. Alphabet Stock Fell 5% In A Day, Why?

Samsung Poorer by $10 per Android Phone

Samsung is the ninth Android-based device to have entered into a license deal with Microsoft. [2] While the argument over the amount of fee has been on for a few months, [3] the agreed figure of $10 is no bargain considering that every Samsung smartphone (such as the Galaxy S-II) will have to shell out this amount. With Galaxy S-II selling 5 million units in July alone, [4] Microsoft’s earns some respectable coin off of this deal.

Google’s Motorola Purchase Is Not Helping Much

In all fairness to Microsoft, the company has had little option other than licensing these past couple of years with Google and Apple have dominated the mobile OS market. High licensing fees can ultimately translate to price increases for smartphones, which can adversely impact Android’s market share in the long run. What is probably even more important to Google is not to let its very own Motorola fall into the licensing trap with Microsoft, [5] which is a distinct possibility considering Google’s track record so far.

See our complete analysis for Google’s stock

Notes:
  1. Wall Street Journal: Samsung, Microsoft Deal Strikes a Blow to Google [↩]
  2. Microsoft Lands Big Android Licensee In Samsung, Google Cries Foul [↩]
  3. Reuters: Microsoft wants Samsung to pay smartphone license: report [↩]
  4. Samsung Galaxy S2 – Most Desirable Handset [↩]
  5. Microsoft New Center: Microsoft Files Patent Infringement Action Against Motorola [↩]