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Microsoft's Devices Division May Lose it's Multi-Billion $ Android Safety Net

Alx

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Jan 22, 2007
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So they were just folding to Microsoft without any resistance at all? Did even asking to see which patents they are infringing on mean a costly court battle?
Lawyers and related activities are horribly expensive. The very fact of browsing through a case with probably thousands of different patents would probably cost a lot, so it's no surprise that companies like MS could count on their counterparts not wanting to call their bluff. Especially since the case is probably a mix of rubbish and relevant patents, so in the end a settlement is a safe solution : at least you know how much it'll cost you.
 

Delusibeta

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Feb 18, 2012
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I do think the losses of the Xbox division is overstated. Sure, the Surface has been a damp squib, and I can see overall hardware losses reaching the $2 billion mark, but I can't see Xbox on its own losing that much. That said, removing Android patients from the equation would make the Devices division look like a black hole, and I'd imagine cuts would shortly follow which would probably affect the Xbone negatively.
 
May 16, 2006
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Which devices division? There are multiple. One would think that the Android licensing would go in the Devices and Consumer Licensing division, which XBox is not in. The structure of their financial reporting changed drastically since that Escapist article.

Devices and Consumer Licensing
Devices and Consumer Hardware (XBox hardware)
Devices and Consumer Other (XBox software)
Commercial Licensing
Commercial Other
Corporate and Other
The reporting HAS changed. There are two main divisions, Consumer and Devices and Commercial now. Those divisions you listed are all subdivisions of the new Consumer and Devices Division. Android is reported in the licensing subdivision now, and xbox hardware and software in the respective subdivisions as you indicated.

Good stuff.
 

JaggedSac

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Jan 14, 2010
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The reporting HAS changed. There are two main divisions, Consumer and Devices and Commercial now. Those divisions you listed are all subdivisions of the new Consumer and Devices Division. Android is reported in the licensing subdivision now, and xbox hardware and software in the respective subdivisions as you indicated.

Good stuff.
If Android patents are keeping Xbox, Surface, and Windows Phone afloat, why are those divisions making a profit without the Android patent royalties, which, as you agree, are now in Devices and Consumer Licensing.

From March 31st Financial Statement
Gross Margin---------------------------3-Months Prior--------------9-Months Prior
Devices and Consumer Licensing---------$3,906------------------------$12,809
Devices and Consumer Hardware---------$258--------------------------$875
Devices and Consumer Other --------------$541--------------------------$1,324
 

nynt9

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Jun 7, 2013
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MS also poured billion(s I think) into the R&D and marketing of the XB1, and their sales are clearly below their expectations. With the cuts to XB marketing and the axing of their TV division, it seems like they are trying to cut their losses with Xbox and spend less money on it already, and if the Android gravy train is no longer operational, shareholders would be very eager to pare down the devices stuff even further.
 
Apr 1, 2013
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"If we start with the overall traditional [Entertainment and Devices Division] business that actually loses money before corporate allocations and back out the nearly $2 billion 95 percent gross margin Android phone royalties, we conclude that Xbox platform plus Windows phone and Skype lose about $2.5 billion per year, and we estimate that the Xbox platform may account for roughly $2 billion of this," Sherlund said.

But, 2 billions per year. Xbox 360 was on the market for 8+ years, that means 16billions in total...
I already said this when it first came up half a year ago but there is no way that the XBox division prior to the One lost $2 billion per year.
I agree; it does seem ridiculous that this guy (just one analyst, remember) is claiming that the Xbox division bleeds $2 billion USD per year. I'm pretty sure MS would be forced to shut down the division by investors were that the case. However, it's quite easy to believe that the Devices Division or whatever it's called is in the red by $2.5 billion per year, if we're accounting for Skype, Surface and Windows Phone as well as Xbox.
 

Windu

never heard about the cat, apparently
Mar 29, 2007
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samsung agreed to it, i don't think they worry about court costs. so microsoft has to have something on them.
 
May 16, 2006
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If Android patents are keeping Xbox, Surface, and Windows Phone afloat, why are those divisions making a profit without the Android patent royalties, which, as you agree, are now in Devices and Consumer Licensing.

From March 31st Financial Statement
Gross Margin 3-Months Prior 9-Months Prior
Devices and Consumer Licensing $3,906 $12,809
Devices and Consumer Hardware $258 $875
Devices and Consumer Other $541 $1,324
Dude, I didn't know about the reporting restructuring. That's why I was saying your information was "good stuff."

My premise was based on the article I quoted in the OP which stated this was how MS was hiding Xbox and Surface losses.

I was complimenting you on bringing information to the thread that I was unaware of.

I wasn't trying to make up a doom-and-gloom story, I was just passing along this story and asking questions how this would impact Xbox. I'm happy to get the facts straightened out.
 

JaggedSac

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Jan 14, 2010
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Dude, I didn't know about the reporting restructuring. That's why I was saying your information was "good stuff."

My premise was based on the article I quoted in the OP which stated this was how MS was hiding Xbox and Surface losses.

I was complimenting you on bringing information to the thread that I was unaware of.

I wasn't trying to make up a doom-and-gloom story, I was just passing along this story and asking questions how this would impact Xbox. I'm happy to get the facts straightened out.
lol, sorry dude, didn't mean to come off as busting your balls.
 

kinoki

Illness is the doctor to whom we pay most heed; to kindness, to knowledge, we make promise only; pain we obey.
Apr 27, 2006
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Is Xbox 360 the only profitable device that Microsoft has released?
 

Hindle

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Apr 7, 2012
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MS also poured billion(s I think) into the R&D and marketing of the XB1, and their sales are clearly below their expectations. With the cuts to XB marketing and the axing of their TV division, it seems like they are trying to cut their losses with Xbox and spend less money on it already, and if the Android gravy train is no longer operational, shareholders would be very eager to pare down the devices stuff even further.
Bing has lost MS $11bn dollars, and as far as I'm aware isn't even profitable. Yet, these shareholders you keep mentioning haven't done anything. So it seems unlikely they'll do anything against Xbox, which hasn't lost $11bn and has been more of a success then Bing.
 

Anony

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Feb 5, 2008
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it's funny how microsoft is literally throwing money at xbox to make it successful (and that it's sorta just a 'side' thing for them)
at the same time, sony is also using money for its other divisions and products to maintain its playstation brand/products

nintendo is the only truly successful gaming console manufacturer since nintendo is a purely gaming company and doesn't have other divisions so to speak to make up for any loses
 
May 16, 2006
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lol, sorry dude, didn't mean to come off as busting your balls.
No problem. I edited the OP too.

I just wanted information and perspective after reading this story, which stated "This figure is estimated to have far exceeded the revenue generated from the sales of Windows phone devices and also allows Microsoft to recover any losses from the X-box, Skype or Surface division."
 

DC1

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Jan 30, 2013
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Bing has lost MS $11bn dollars, and as far as I'm aware isn't even profitable. Yet, these shareholders you keep mentioning haven't done anything. So it seems unlikely they'll do anything against Xbox, which hasn't lost $11bn and has been more of a success then Bing.
Bing offers far more relevance an extension to Microsoft's profitable service offerings than the XBOX.
I would explain further but I'm in the car.

Perhaps someone will add my point for clarity.
If not, I'll reach out once I get to my destination.
 

nynt9

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Jun 7, 2013
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Bing has lost MS $11bn dollars, and as far as I'm aware isn't even profitable. Yet, these shareholders you keep mentioning haven't done anything. So it seems unlikely they'll do anything against Xbox, which hasn't lost $11bn and has been more of a success then Bing.
First of all, I just mentioned shareholders once.

Secondly, MS have been willing to eat the costs of Bing because it's integrated into many of their services, and services are among their most profitable ventures. It's a Trojan horse. It's even integrated into Facebook and Windows 8.1. Also services is now their core focus.
 

Gattsu25

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Jun 6, 2004
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samsung agreed to it, i don't think they worry about court costs. so microsoft has to have something on them.
That's exactly how patent litigation works.

You are threatened with a specter of a threat: you are infringing on [x] number of patents. You will only find out what these patents are if you decide to take this case to trial. If this case goes to trial it will cost you an arm and a leg (as you will have to offer a detailed, expansive, cogent defense to each and very single claim for each and every single patent) and you will be fighting on our turf (a court district that near unanimously sides with the patent holder).

Should you lose this case you will have a world of hurt in legal fees to recover, plus a massive penalty fee will like likely have to pay, plus ongoing higher-than-normal royalties for the patents.

Should you manage to win, you don't pay the damages and royalties for all/most of the patents and their claims...but you'll likely have to absorb the legal fees.


Should you settle, then hey maybe you get a discount on the royalties but you can never talk about the terms of our agreement. Oh, and well use the fact that you settled as evidence that our patents have credence in the next shakedown. Because Samsung would never agree to the likely least expensive course of action unless they were guilty, right?
 
Apr 1, 2013
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Is Xbox 360 the only profitable device that Microsoft has released?
Good question. I guess it might be? I guess they don't have a long list of hardware, excluding accessories like mice and so on. Zune, Surface, Xbox, maybe some PCs or laptops?

Bing has lost MS $11bn dollars, and as far as I'm aware isn't even profitable. Yet, these shareholders you keep mentioning haven't done anything. So it seems unlikely they'll do anything against Xbox, which hasn't lost $11bn and has been more of a success then Bing.
How the fuck can a search engine lose $11 billion?! I mean, what the enormous costs on it?
 

jay23

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Jan 2, 2013
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I've read this article before this year, don't think it's very accurate. Plus it's coming from the one guy(Rick Shurland) who wants Microsoft to sell the Xbox division.

Yup. Time to cut the line on this BS.
This has been known for years.
 

Yopis

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Aug 23, 2009
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it's funny how microsoft is literally throwing money at xbox to make it successful (and that it's sorta just a 'side' thing for them)
at the same time, sony is also using money for its other divisions and products to maintain its playstation brand/products

nintendo is the only truly successful gaming console manufacturer since nintendo is a purely gaming company and doesn't have other divisions so to speak to make up for any loses


PS2 had profit also PS1 and PSP. PS3 was the mistake. Also how much has Nintendo put into online?
 

Ganondolf

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Jul 2, 2013
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This list of patents makes no difference. the companies will still pay as they know that they do infringe on some of the patents.

Motorola tried fighting in court and lost on multiple patents and had sales/import bans on their handsets.
 

Hindle

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Apr 7, 2012
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First of all, I just mentioned shareholders once.

Secondly, MS have been willing to eat the costs of Bing because it's integrated into many of their services, and services are among their most profitable ventures. It's a Trojan horse. It's even integrated into Facebook and Windows 8.1. Also services is now their core focus.
And MS have the same plans for Xbox, they intend for all their devices and products to be compatible in some way, hence why it's unlikely they'll sell off the division.
 

Noshino

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Apr 16, 2009
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Wow, that could be huge!


So, if this finally happens, when could it be effective?
they would have to actually be challenged in court first

Intertrust, joint venture between Philipps and Sony. Well known patent trolls.
I would like to know what makes Intertrust "well known" about patent trolling.

DRM has been InterTrust's business even before acquired by Sony and Phillips. They provide actual services as well.

Also, from a recent article by The Verge

Intertrust has reached out to clarify that it has only filed two patent infringement lawsuits since its founding in 1990, and that the majority of its 300 patents were invented by its employees, with only "20 to 30" gained from acquisitions of other companies.
http://www.theverge.com/2013/6/5/4399130/the-white-house-vs-patent-trolls-lawsuits

Phillips is the one that is actually very much into patent trolling.
 
May 16, 2006
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Bing has lost MS $11bn dollars, and as far as I'm aware isn't even profitable. Yet, these shareholders you keep mentioning haven't done anything. So it seems unlikely they'll do anything against Xbox, which hasn't lost $11bn and has been more of a success then Bing.
Fact is, the big institutional shareholders an analysts have been and are continuing to pressure the board about spinning off Xbox though. This isn't a made-up thing at all.

If I had to guess why this is, I'd imagine the difference you see is probably because the Xbox business is likely considered a business that has some actual brand and financial value that could be extracted by spinning off the company and issuing shares or selling to a buyer. Bing on the other hand is probably perceived by those same investors and analysts as a beast that probably nobody would be willing to take on at this point, so MS is kinda stuck with it and must make a go of it.

They really are two completely different business situations.
 

nynt9

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Jun 7, 2013
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And MS have the same plans for Xbox, they intend for all their devices and products to be compatible in some way, hence why it's unlikely they'll sell off the division.
I never implied they'd sell it off. But they might throw it in a corner and let it die without any proper support like they did to the Zune (used to own one, fuck them for not giving it the attention it needed to become a market leader). They've already downsized their vision for the Xbox several times and it's clearly not selling as well as they expected.
 

Vast.

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May 21, 2014
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For the literally hundreds of media articles and forum threads that have popped up on this subject in the past and currently...there are only ever been one extremely vague and skeptical source on the Xbox division losing $2 Billion/Year and being supplanted by Android royalties.
That source was an investor group that was heavily vying to spin off Xbox and using creative accounting to do so.

And yet the Xbox division has been making money since 2007. Long before the losses of Zune, and Windows Phone came in or the profits of Android royalties. You really think that as the generation went on, Microsoft LOST 2 Billion per year due to Xbox instead of compounding the LIVE Revenue, Hardware sales, software royalties, and Kinect's huge success?

Some common sense on this issue is greatly appreciated instead of parroting the same single dubious source every time this topic comes up.
 
Sep 20, 2013
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what sort of patent does MS hold over android? and why are this people paying when the os is from google? They should tell MS to go see google or am i seeing this the wrong way?

Also i hear xbox looses money even during the 360 era. How is it losing money when they were making profit from every game they sell and console + live.
There is more to a smartphone than an operating system.
 

nynt9

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For the literally hundreds of media articles and forum threads that have popped up on this subject in the past and currently...there are only ever been one extremely vague and skeptical source on the Xbox division losing $2 Billion/Year and being supplanted by Android royalties.
That source was an investor group that was heavily vying to spin off Xbox and using creative accounting to do so.

And yet the Xbox division has been making money since 2007. Long before the losses of Zune, and Windows Phone came in or the profits of Android royalties. You really think that as the generation went on, Microsoft LOST 2 Billion per year due to Xbox instead of compounding the LIVE Revenue, Hardware sales, software royalties, and Kinect's huge success?

Some common sense on this issue is greatly appreciated instead of parroting the same single dubious source every time this topic comes up.
You ask for a citation, then provide claims yourself without a citation? Appealing to "you think MS would do that?!" makes you look silly since Penello said "you think we'd give a 30%+ power advantage to Sony? We CREATED DirectX!" and ate crow, so MS actually do silly things.
 

Hindle

Banned
Apr 7, 2012
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Fact is, the big institutional shareholders an analysts have been and are continuing to pressure the board about spinning off Xbox though. This isn't a made-up thing at all.

If I had to guess why this is, I'd imagine the difference you see is probably because the Xbox business is likely considered a business that has some actual brand and financial value that could be extracted by spinning off the company and issuing shares or selling to a buyer. Bing on the other hand is probably perceived by those same investors and analysts as a beast that probably nobody would be willing to take on at this point, so MS is kinda stuck with it and must make a go of it.

They really are two completely different business situations.
The only sources who say the shareholders want rid of Xbox are dubious at best. Forbes? Lol, Xbox as a brand has far more value under MS then what they'd get if they sold. When you factor Live subscriptions, royalties from 3rd parties, Halo and Gears, all this is money they would lose if they sold the division.
 

zomgbbqftw

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Jan 21, 2011
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So MS get a bunch of competing OEMs to licence unknown patents and threaten legal action backed up by their billions and friendly US courts if they decide not to.

Somewhere in Italy some Mafia Don is reading this and approving. Its racketeering by any other name. I would be very surprised if companies don't sue MS for their licence monies if it turns out that MS don't have any relevant IP for Android and it was all a massive bluff. Misrepresentation is illegal and good on the Chinese government for sorting them out.
 

Gattsu25

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Jun 6, 2004
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The user I quoted was talking about InterTrust, which iirc aren't really considered patent trolls.

And even then, if you want to talk about Sony, that consortium you brought up includes Apple and Microsoft...lol
Oh yeah, everyone is complicit in this bullshit. It's a billion dollar industry based around shakedowns.
 

driver116

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Nov 1, 2012
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So MS get a bunch of competing OEMs to licence unknown patents and threaten legal action backed up by their billions and friendly US courts if they decide not to.

Somewhere in Italy some Mafia Don is reading this and approving. Its racketeering by any other name. I would be very surprised if companies don't sue MS for their licence monies if it turns out that MS don't have any relevant IP for Android and it was all a massive bluff. Misrepresentation is illegal and good on the Chinese government for sorting them out.
It does come off as sounding like a complete scandal.
 

Maidenpool?

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Aug 8, 2013
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So... if I understand this correctly... someone correct me if wrong...

MS has made available all its patents in China for whatever reason

However that means everyone can now see (by looking at all their current and expired patents) just how much "ownership" MS has in the Android OS

XBox and Android are in the same division in MS

If MS is ruled to no longer be a creator of Android - the Android profits will cease coming in and the Xbox will be in deep shit?
 

JaggedSac

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Jan 14, 2010
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So... if I understand this correctly... someone correct me if wrong...

MS has made available all its patents in China for whatever reason

However that means everyone can now see (by looking at all their current and expired patents) just how much "ownership" MS has in the Android OS

XBox and Android are in the same division in MS


If MS is ruled to no longer be a creator of Android - the Android profits will cease coming in and the Xbox will be in deep shit?
The bolded is incorrect. Unless they are spreading android patent money over multiple divisions.
 

lantus

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Apr 15, 2009
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I don't think this safety net will matter much for the Xbox brand. They know their own financial situation with it and they wouldn't continue to invest and keep it around if it lost 2 billion a year. I'm sure they're still losing money, but that seems pretty extreme to me leading me to believe they would have pulled the plug by now if that was the case.
 

jay23

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Jan 2, 2013
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Wow, if Microsoft does indeed lose their Android 'protection money' soon, we definitely could see moves to spin off or sell their gaming division in the coming years. They're not wrong to focus on mobile devices. They've just been dropping the ball at almost every avenue.
Sony Too™

Oh yeah, everyone is complicit in this bullshit. It's a billion dollar industry based around shakedowns.
This

What fairy tale world do some of you live in? Corporations are evil and greedy.
 

Ganondolf

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Jul 2, 2013
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So MS get a bunch of competing OEMs to licence unknown patents and threaten legal action backed up by their billions and friendly US courts if they decide not to.

Somewhere in Italy some Mafia Don is reading this and approving. Its racketeering by any other name. I would be very surprised if companies don't sue MS for their licence monies if it turns out that MS don't have any relevant IP for Android and it was all a massive bluff. Misrepresentation is illegal and good on the Chinese government for sorting them out.
Motorola challenged MS in court and lost in the US and Germany. Google gives Android free to OEM (As long as they include Google Services) as such the OEM can mod Android in any way they see fit. Google does not give any legal protection as the OEMs are not paying.

I believe the Chinese only wanted the list because there was a worry that nokia patents would have been included. they have not stopped MS from using these patents, business is as usual.
 

hwalker84

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Because this is related to the parent division of Xbox.
Is this a joke response? This has absolutely nothing to do with gaming. The iPhone is arguably one the highest selling portable gaming devices on the market but every time they acquire a new company or are in the news for non gaming related things we don't see these posted on the gaming side do we?
 
Jun 5, 2013
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"If we start with the overall traditional [Entertainment and Devices Division] business that actually loses money before corporate allocations and back out the nearly $2 billion 95 percent gross margin Android phone royalties, we conclude that Xbox platform plus Windows phone and Skype lose about $2.5 billion per year, and we estimate that the Xbox platform may account for roughly $2 billion of this," Sherlund said.



But, 2 billions per year. Xbox 360 was on the market for 8+ years, that means 16billions in total...
It's not actually losing that must that's just a guesstimate made by one group. It definitely seems to be losing money, a lot of money would be pumped into R&D and studios.
 

nynt9

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Jun 7, 2013
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Is this a joke response? This has absolutely nothing to do with gaming. The iPhone is arguably one the highest selling portable gaming devices on the market but every time they acquire a new company or are in the news for non gaming related things we don't see these posted on the gaming side do we?
I'm not sure what's lacking with your reading comprehension. The rumor has been that Microsoft cover the losses incurred by Xbox using Android patent royalties so that the devices division overall doesn't look like a money sink to investors. Now that the Android royalties might not be a thing anymore, the losses of the devices division will be more apparent to investors, which in turn will put the Xbox division into a more precarious position of having to prove its worth instead of hiding behind Android profits
if the rumors are to be believed.

All of this has been made pretty clear in the thread.
 

hwalker84

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Apr 25, 2007
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I'm not sure what's lacking with your reading comprehension. The rumor has been that Microsoft cover the losses incurred by Xbox using Android patent royalties so that the devices division overall doesn't look like a money sink to investors. Now that the Android royalties might not be a thing anymore, the losses of the devices division will be more apparent to investors, which in turn will put the Xbox division into a more precarious position of having to prove its worth instead of hiding behind Android profits
if the rumors are to be believed.

All of this has been made pretty clear in the thread.
That's because in typical GAF fashion I didn't read the OP fully..... LOL I'll admit it when I'm wrong.