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Xiaomi buys Microsoft phone patents

Do Not UseDo Not Use 1/06/2016

Smartphone maker Xiaomi has bought the rights to hundreds of Microsoft's smartphone inventions.

Experts say the patent deal paves the way for the Chinese firm to sell its handsets in Western markets.

Microsoft will benefit from the fact that some of its Android apps - including Office and Skype - will now be pre-installed on Xiaomi devices.

The announcement comes at a time when Xiaomi has been struggling to meet sales targets.

The Beijing-based company originally set itself a target of selling 100 million smartphones in 2015.

But it managed to sell only 71 million, partly because of increased competition from domestic rivals.

Oppo and Vivo overtook Xiaomi in phone shipments in the first three months of 2016, while Huawei extended its lead, according to research firm IDC.

That pushed Xiaomi down to seventh place in global market share. It had been ranked third in 2014.

Biggest challenge

"The patent deal comes at a pretty important time for Xiaomi, which has topped out in the Chinese market," said Ben Wood from consultancy CCS Insight.

"Intellectual property had been the biggest challenge it faced in breaking out of its active markets in Asia and Brazil. Having a patent portfolio lets it defend itself against rivals who would otherwise have sued."

Xiaomi gains nearly 1,500 patents as part of the deal, including rights to communications, video and cloud technologies.

The company has previously faced accusations of patent infringement from Blue Spike, a US-based rightsholder and Swedish telecoms equipment maker Ericsson.

Microsoft has recently made moves to scale back its handset operations, cutting jobs in its smartphone division and selling its Nokia-branded feature phone business.

However, under chief executive Satya Nadella's leadership it has tried to encourage use of its products on non-Windows handsets.

Xiaomi already used Microsoft's Azure platform to power its MiCloud service.

From September, it will also pre-load Word, Excel, PowerPoint, Outlook and Skype onto several of its devices including the Mi 5 and Redmi Note 3.

"Microsoft doesn't have much interest in being a mass market smartphone manufacturer," said Mr Wood.

"In doing the patent deal with Xiaomi, it gets an opportunity to get more users engaged with its apps, and can attempt to turn them into an ongoing revenue stream via subscriptions and other fees.

"There are an awful lot of people using Microsoft products in China already, but typically the software is pirated and has made the firm no money."

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