Microsoft share price up, agrees to end contract dispute with Samsung

Microsoft Corp and Samsung Electronic Co announced on Monday they have agreed to settle a contract dispute over the South Korean giants use of the Android operating system.

Although Google owns the Android platform, some technologies used in the operating system fall under Microsofts patents. For this reason every smartphone manufacturer is obligated to pay Microsoft royalties for every Android-based device they sell.

In 2011 Samsung inked an agreement with Microsoft for the use of Android for an undisclosed amount. However, last August Microsoft filed a lawsuit against the South Korean company, after it failed to deliver on its financial obligations and then refused to pay interest on the delayed payment.

A month later it was revealed that the two companies had signed a seven-year contract, under which Samsung had agreed to make annual payments to the US giant. In fiscal 2013, the South Korean company paid $1 billion in royalty fees.

However, it delayed its second payment and Microsoft claimed that Samsung owns more than $6.9 million in interest. On the other hand the South Korean company argued that Microsoft breached their agreement after its acquired Nokia Corps mobile business.

“Samsung and Microsoft are pleased to announce that they have ended their contract dispute in U.S. court as well as the ICC arbitration. Terms of the agreement are confidential,” the two companies said in a joint statement late Monday.

The agreement also paves the way for future collaboration between the two tech giants, as competition in the mobile market is rapidly increasing by Apple on one end and low-cost Chinese smartphone manufacturers, such as Xiaomi, on the other.

Samsung has been relying heavily on Android to power its devices, but it has also designed several tablets and smartphones that are equiped with Microsofts Windows Phone operating system.

Samsung has been linked to showing interest toward making more devices that run on Microsofts platform, outlining efforts to reduce its dependence on Android.

The Korean company is also developing its own operating system, dubbed “Tizen”, so far Samsung has not been successful in a wider distribution of the platform on mobile devices, but it was implemented on several other electronics made by Samsung, including its smartTV and watch.

Microsoft lost 0.12% on Monday and closed at $42.36 on the NASDAQ, marking a one-year increase of 15.86%. The company is valued at $347.51 billion. On Tuesday the stock was up 0.02% at 10:56 GMT during pre-market trading.

According to the Financial Times, the 31 analysts offering 12-month price targets for Microsoft Corporation have a median target of $50.00, with a high estimate of $58.00 and a low estimate of $38.00. The median estimate represents a 18.04% increase from the last closing price.