SEATTLE, 30 SEPTEMBER 2010 - Microsoft may be one of the only remaining mobile operating-system providers that charges handset makers a licensing fee, but in exchange vendors get at least one important benefit: protection from intellectual property worries.
That could be one reason that Samsung, HTC and LG are willing to pay to use Windows Phone 7, but it doesn't appear to be enough to convince other former Windows Mobile users, like Motorola, to commit to the operating system. The fee could also reduce the number of models that handset makers build using the software.
The first phones running Microsoft's revamped Windows Phone 7 software are expected to come out in October. The majority of early reviews of demo phones have been positive. But Microsoft has tough new competition from the popular iPhone and the fast-growing Android platform.
Despite that competition, Microsoft is in the unique position of being the only remaining major smartphone operating-system developer that charges for the use of the software. Android and Symbian are both free. Palm, recently bought by Hewlett-Packard, no longer licenses its operating system to other manufacturers. Apple and Research In Motion have their own software that they use exclusively on their own hardware.
Microsoft says there are some clear advantages for handset makers that pay for the operating system.
"Our hardware partners are lining up to deliver these phones because they know free is never really free," a Microsoft spokesperson said through the company's public relations representative. "When you're creating a phone, the cost of licensing the operating system is only the beginning, because there are plenty of other development costs."
While Microsoft offers support to handset makers as they integrate the software into their hardware, developers of free operating systems, like Google, don't. Some hardware vendors using Android have said that investment can be significant.
Microsoft also offers "a better managed and coordinated ecosystem that might improve the chances of success for the entire platform," said Al Hilwa, an analyst with IDC. Microsoft's closely controlled environment leaves little room for the fragmentation that is plaguing Android.
But one of the most important things that Microsoft may offer handset makers in exchange for the licensing fee is intellectual property protection.
"Microsoft indemnifies its Windows Phone 7 licensees against patent infringement claims," the company said. "We stand behind our product, and step up to our responsibility to clear the necessary IP rights."
That could become a key differentiator for the company.
"Microsoft has one of the largest IP portfolios out there, so you are very well-protected," said Chris Hazelton, an analyst with The 451 Group.
Hilwa agrees. "The Java/Android lawsuit highlights some of the risks of not having IP protection," he said via e-mail.
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