Microsoft: We Can Make Money from Android Even if Google Doesn't

(MoneyWatch)  In the history of high tech, Microsoft (MSFT) has always seems more of a duke-it-out bruiser than Apple (AAPL). But in a recent move against Google (GOOG), Microsoft shows itself to be slicker than Apple by sowing seeds of strategic disruption in Android's path... while getting paid to do so.

Back in early March, Apple announced it would sue handset vendor HTC, which makes Google's Nexus One among other Android phones, for patent infringement. It seemed like a petulant and foolish gesture on many levels. Yes, we all understand that Apple CEO Steve Jobs feels affronted and wants to discourage any hardware vendor from doing business with Google. But with Google as his ultimate target, he focuses on a company that has a big pile of money to wage legal war.

On the other hand, what Microsoft did was slick. Steve Ballmer would also like to see Google out of the handset business. However, Microsoft seems to understand that trying to beat a handset vendor into oblivion might not accomplish much. After all, even with Microsoft's resources, how many companies would they want to sue at the same time? So, instead, Microsoft announced a patent licensing agreement with HTC:

Microsoft Corp. and HTC Corp. have signed a patent agreement that provides broad coverage under Microsoft's patent portfolio for HTC's mobile phones running the Android mobile platform. Under the terms of the agreement, Microsoft will receive royalties from HTC.

HTC has built phones using Microsoft operating systems for years, unlike Apple, so you can understand some reluctance to shoot a customer. Fueling the push was Microsoft's reported belief that Android infringes on many Microsoft patents.

That means Microsoft probably makes more money directly on the Android operating system than Google. But it gets more interesting, because this is clearly a first step, and Microsoft gains other advantages:

• Chances are that other Android handset vendors will be more open to also paying royalties, seeing as HTC apparently gave up without a fight.
• Royalties make Android a less attractive choice of handset OS for vendors. Given that the iPhone and BlackBerry OSs aren't available to license and Palm's (PALM) webOS hasn't drawn a lot consumer support, the move narrows the field of available operating systems in Microsoft's favor.
• Microsoft has also made it clear that it sees smartphones as "fully functional computers that fit in the palm of your hand." That could translate into more direct legal hassles for Apple, which may not have the patent depth of Microsoft in this area.

In the meantime, Microsoft can do what I suggested it might at the beginning of March: sit around and gloat while Google and Apple attack each other.