Google's Motorola Buy Is Paying Off

There were a few raised eyebrows when Google ( GOOG - Analyst Report ) invested $12.5 billion into Motorola’s patents last year. Now, after reporting a dismal quarter, in which Motorola pulled down Google’s results and had it announcing job cuts, the company could be hitting pay dirt.

On Tuesday, Google expert Michael Dansky told a Seattle court that Microsoft ( MSFT - Analyst Report ) would make $94 billion in revenue from its Xbox game consoles and Surface tablets incorporating Motorola technology through 2017.

Based on these numbers, Google estimates that Microsoft should be paying it $4 billion a year, while Microsoft claims that the amount should not exceed a million dollars. Going by the number of private sessions the two are taking with the judge, it’s clear that Google is asking for money that it will at least partly extract.

Just the day before, a Madison, WI judge set aside Apple’s ( AAPL - Analyst Report ) claims that Motorola was asking for too much, although notably, the judge did not furnish reasons (AP report). Motorola’s claims with Microsoft remain unclear at the moment, but the company has been asking Apple for 2.25% of the price of Apple devices using Wi-Fi or cellular technologies.

Despite rumblings on privacy issues, Google has been more or less successful in legal matters. The encounter with Oracle ( ORCL - Analyst Report ) ultimately worked in its favor and it successfully wrapped up both ITA and Motorola acquisitions, despite anti-competitive concerns raised by Expedia ( EXPE - Analyst Report ) and others.

Gartner estimates that both Android and Windows-based devices (smartphones, tablets and computers) will grow very strongly over the next few years. However, while Windows-based devices will grow 52% from an estimated 1.5 billion at the end of this year to 2.28 billion at the end of 2016, Android devices will grow 278% to 2.3 billion units during the same time period.

While Microsoft has been relatively less successful in the wireless segment, the company is set to make a splash with its Surface tablet and latest Windows Phone OS. So this is a good time for Google to cash in.

Google, Microsoft, Apple and Oracle currently carry a Zacks #3 Rank (short-term Hold rating). Expedia on the other hand has a Zacks #2 Rank (Buy rating over the next 1-3 months).