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LG likely to ink patent agreement with Microsoft next month

Vice chairman Koo may meet Microsoft counterpart at APEC CEO Summit


LG Electronics will likely ink an agreement on patent loyalties with U.S. software giant Microsoft as early as next month, industry sources said Tuesday.

The move is expected to further burden the Korean firm which is currently suffering from a sparse smartphone line-up. It could incur losses that amount to millions of dollars as the source noted that the firm is most likely to offer $3 per every Android device to Microsoft. A big portion of LG’s smartphones are currently running on the Android platform.

LG Electronics vice chairman and CEO Koo Bon-joon may meet his Microsoft counterpart at the APEC 2011 CEO Summit in Honolulu on Nov. 10-12, according to a source familiar with the matter.

The APEC forum has stated that Microsoft’s chief research and strategy officer Craig Mundie will be attending the event.

LG Electronics is expected to pay a figure similar to what its rival Samsung Electronics has agreed to give Microsoft for every Android-based device it sells -- estimated to be around $3 per gadget, the source said.

However, LG Electronics refused to confirm the report, saying the issue was not a topic under discussion right now.

“We haven’t heard anything special about our Android-based mobile phones,” an LG spokesperson said.

LG Electronics has recently shown sluggish sales of mobile phones that contributed to bringing down its credit rating outlook, but it is among the major mobile vendors, along with Samsung Electronics and HTC, that adopted Google’s free-to-use Android platform.

Koo Bon-joon
Koo Bon-joon
Bill Gates
Bill Gates

LG has sold about 10 million smartphones units globally in the first half of this year, with it targeting sales of 24 million units by the end of this year. Considering that most LG smartphones are equipped with the Android platform, it is expected in incur losses of over $60-70 million solely in 2011.

Microsoft, however, has been arguing that the Android platform infringes on a number of its patents and that Android device makers must respect its intellectual property rights.

Due to such claims, Taiwan’s HTC gave the green light to a cross-licensing deal with Microsoft. HTC reportedly agreed to give $5 to Microsoft for every Android gadget sold in the market.

The practice was also implemented by LG’s biggest rival Samsung Electronics on Sept. 28. The event received increased attention because Samsung is also the No.1 maker of Android-based wireless devices.

Samsung did not disclose how much it has offered to pay Microsoft for every Android-based gadget it sold, but its official said it was lower than HTC’s $5 per device.

In return of royalty fees, the two firms said they would cooperate closely on the development and marketing of Microsoft’s Windows Phones.

Microsoft is currently planning to launch Samsung and HTC smartphones, running on its Mango OS, in the U.S. and Europe in the coming weeks.

Over half of the global contract manufacturer industry, or 53 percent, of Android and Chrome devices, is now under license to Microsoft, ultimately making Microsoft the winner involving its patent war against Android mobile vendors.

“LG has no other options then to follow the practice of its predecessors,” said another industry source who wished to remain unnamed. “Samsung did it and so did HTC. If LG decides not to go with it, the firm will end up losing a greater sum of money in court.”

Lee Soon-hak, an analyst at Mirae Asset Securities, said LG Electronics will eventually follow the footsteps of other vendors like Samsung and HTC, but the impact of the agreement on its earnings will differentiate depending on the timing.

“It will depend on conditions like the figure of the royalty agreed by the two sides and when LG will reflect it in its earnings report,” he said.

Some analysts, however, said the impact of the royalty payment will be limited for LG due to its current low earnings figure.

“Because LG is not showing a good performance, the event will affect its stocks limitedly, considering that the firm has low expectations (from the market) at this point,” said Lee Seung-woo, an analyst at Shinyoung Securities.

By Cho Ji-hyun (sharon@heraldcorp.com)

 

<한글기사>
LG전자, 마이크로소프트와 특허 라이선스 체결 내달 임박?

LG전자와 마이크로소프트 (MS)가 이르면 다음 달 스마트폰과 태블릿 제품관련 크로스 라이선스 (특허권 상호부여) 계약을 체결할 가능성이 높은 것으로 알려졌다.

이 분야에 정통한 한 업계 관계자는 양사가 LG 전자가 만든 휴대폰과 태블릿 중 구글 안드로이드 플랫폼을 사용하고 있는 기기에 한해 한 대당 약 3달러의 로열티를 지불하는 형식의 합의를 할 가능성이 크다고 전했다.

또, LG전자 구본준회장이 내달 10일에서 12일 미국 호놀루루에서 열리는 APEC CEO 회담에서 마이크로소프트 관계자와 만나 상세한 계획을 논의 할 가능성이 높다고 말했다.

이 APEC CEO 회담에는 마이크로소프트의 최고 리서치 및 전략 전문가인 크레그 문디가 참석을 알려왔다.

LG전자가 마이크로소프트와 특허계약을 체결하게 되면 올해 수천만 달러의 손실을 보게 될 것으로 예상된다. 올해 LG전자의 스마트폰 목표는 2400만대인대 스마트폰의 대부분이 구글의 안드로이드 운영체제를 쓰고 있다.

마이크로소프트사가 이전에 HTC와 삼성전자와 체결한 크로스 라이선스 계약을 보면 두 스마트폰 제조업체는 구글 안드로이드 운영체제에 기반한 스마트폰과 테블릿 PC관련 특허 로열티를 마이크로소프트에 지급하기로 합의했다.

정확한 금액이 공개되진 않았으나 HTC는 안드로이드 기기 한대당 로열티 5불을 지불하고 삼성전자는 그보다 낮은 한 대당 3불 정도로 보도되고 있다.

이와 관련, 또 다른 업계관계자는 LG전자가 마이크로소프트와 특허 계약을 체결하는 것이 LG로서는 불가피한 선택이라고 했다.

그는 “(특허계약을) 삼성이 했고 HTC가 했다”며 “특허 계약을 체결 안 하면 법정에 서고 돈을 더 많이 잃게 될 것”이라고 말했다.

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