Licensing helps Microsoft grab Windows Phone niche

By Steven D. Jones

–Samsung licensing deal is seventh in three months

–Deals strengthen Windows Phone despite slim market share

–Mango phone update coming to market this fall

Microsoft Corp.


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has quietly struck patent-licensing deals with the world’s leading handset makers, establishing beachheads it can use to push its Windows Phone 7 operating system.

Over the last three months, the Redmond, Wash.-based software giant has negotiated licensing agreements with seven hardware companies that use Google Inc.’s


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Android operating system. Microsoft has done this by threatening litigation, cutting deals and leveraging existing relationships.

On Wednesday, Microsoft cut its latest deal, a broad pact with Samsung Electronics Co. (005930.SE, SSNHY), the world’s second-biggest cell phone maker.

“Microsoft and Samsung see the opportunity for dramatic growth in Windows Phone,” Andy Lees, president of Microsoft’s Windows Phone division, said in a statement. “We’re investing to make that a reality.”

The deals, plus a pact last year with HTC Corp. (2498.TW, HTCXF), represent Microsoft’s efforts to expand the presence of Windows Phone 7, a well-regarded but little-used operating system. Microsoft is arriving to market years behind both Android and Apple Inc.’s


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iOS, which have a combined 68.8% of the market, according to ComScore. By comparison, WP7 has just 5.7%.

Next week, Apple is holding a product event at its Cupertino, Calif., headquarters at which it is widely expected to launch the fifth generation of its popular iPhone handset.

Samsung, HTC and Finland’s Nokia Corp.


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are expected to introduce phones running the Mango update of Windows Phone this fall. Earlier this month, ATT Inc.


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said it would begin selling three phones running the Mango update, two made by Samsung and one by HTC. ATT sells more Windows Phones than any other U.S. carrier.

“There is no doubt that Microsoft’s IP strategy is a key ingredient in the Windows Phone play,” said Al Hilwa, an analyst at research boutique IDC. Hilwa said the agreement with Samsung was important because of its place as the top seller of Android devices.

On Wednesday, Microsoft shares, which trade roughly at the level they traded at a decade ago, were down 0.4% at $25.57.

For Samsung, which trails only Nokia in cell phones, the deal allows it to hedge its bets on the direction of mobile computing by keeping a foot in both the Android and Windows worlds. The deal calls for joint development with Microsoft, in addition to protecting Samsung from Microsoft patent claims.

In a written response to questions, a Samsung spokesman said the company expected to “continue to enjoy a strong partnership with Google around the Android.” The number of Android and Windows devices Samsung builds “will be determined based on customer demand,” the spokesman said.

Microsoft doesn’t disclose how many patent-licensing agreements it has struck with phone makers, but says it has signed more than 700 licensing agreements since 2003.

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