Dynamics of Xiaomi and Microsoft team-up

Xiaomi has agreed to buy about 1,500 patents from Microsoft in exchange for bundling Microsoft Office and Skype with their smartphone devices. This was announced earlier during the day and we have been closely monitoring the situation and the various factors that made both tech giants in teaming up together. Curiously this move comes right before the highly anticipated entry of Xiaomi, the popular smartphone company from China in the US smartphone market and other western markets. The nature of patents part of the deal is unclear at the time of writing. Talking to CIO, Bryan Ma, Vice-President for device research at IDC adds “I’m assuming that Microsoft would want to keep its Android patents, and thus probably wouldn’t sell those,” “Either way, Xiaomi was trying to build up its patent portfolio, particularly to help it in its overseas efforts, so this sounds like it gives them a nice boost,” Ma said. The parents transfer deal is a part of a larger cross-patent licensing deal between Microsoft and Xiaomi and this deal comes after similar cross-patent licensing deals with Asus, Samsung and Dell. Both the companies have much bigger hopes with the deal than merely the cross-patent deal which for Microsoft translate into increasing the market share of its’ Microsoft Office platform along with Skype and for Xiaomi to successfully rejuvenate it’s growth. The growth as reported by Fortune has fallen flat in first quarter for the company and it’s only driven by lower-priced models selling in India, China and Brazil. The company had fallen out of top 5 in terms of global market share for smartphones from the third position it held just approximately a year back. But according to a IDC report it has managed to stay in the top 5 in terms of global market share in Quarter 2 of 2016. The deal will strengthen Xiaomi’s IP weakness that had prevented it from entering the developed markets. The weakness was noted by the fact that Xiaomi was the last one to add the fingerprint sensor in its devices out of all the Chinese smartphone makers. For Microsoft, on the other hand, the deal focuses on the revised strategy for pulling the users into the ecosystem through web and mobile apps through availability across all platforms rather than pushing them to adopt Windows Phone platform. This comes directly after the misadventures with Nokia that aggregated up to more than $7.2 billion along with other such cross-patent licensing with other OEM’s and other write-downs. However despite the deal Xiaomi has a long road ahead of itself to conquer the market in developed countries including the restructure of key business operations like distribution of Smartphones through online resellers to shifting to brick and mortar stores.