Microsoft is making $2bn every year in patent licensing for Android, according to Nomura financial analyst Rick Sherlund.
However, the 95 per cent profit margins it enjoys as a result of the popularity of Android is covering up deep losses in the Entertainment and Devices group, which also comprises the Xbox games console, Skype and Windows Phone.
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According to Sherlund's calculations, if Android licensing fees are put to one side, the Group is losing about $2.5bn, with the Xbox platform responsible for an estimated $2bn of that loss, while Skype and Windows Phone comprise the rest of the losses.
Sherlund believes that Xbox ought to be spun out of Microsoft because it does not "fit" with what the rest of the company does.
The latest Xbox will finally be released this month after what is widely regarded as a disastrous launch in which Microsoft was forced to backtrack on several fronts: from seeking to ban second-hand game sales to its original demand that gamers must keep their new Xboxes online, all the time, if they wanted to play the games they had bought.
Furthermore, Microsoft's console will be £100 more expensive because it will have the Kinect controller built-in - recording people's conversations and movements even when it is switched off.
As a result of those mis-steps, Sony's Playstation 4 is tipped to be the better seller and, therefore, the more profitable platform. In addition, the console market may be shaken up next year with the entry of the Steambox, a Linux-based console produced by Valve Software, which runs the popular Steam games website and gaming environment.
With 60 million gamers already using Steam to download and play games, the Steambox may provide a more attractive alternative to both Xbox and Playstation, while putting new momentum behind Linux on the desktop.
