Microsoft is investing in a hot startup that’s trying to weaken Google hold over Android.
People familiar with the matter say Microsoft is putting money into Cyanogen, which is building a version of the Android mobile-operating system outside of Google’s auspices.
Microsoft would be a minority investor in a roughly $70 million round of equity financing that values Cyanogen in the high hundreds of millions, one of the people said. The person said the financing round could grow with other strategic investors that have expressed interest in Cyanogen because they’re also eager to diminish Google’s control over Android. The identity of the other potential investors couldn’t be learned.
Spokespeople for Microsoft and Cyanogen declined to comment.
The investment would be unusual, because Microsoft offers its own Windows Phone mobile operating system. But Windows Phone has only about 3% market share, which may be prompting Microsoft to consider unconventional steps.
Android was intended as an “open source” operating system that hardware makers can deploy in their devices for free. Yet Google has frustrated manufacturers in recent years by requiring them to feature Google apps and set Google search as the default for users, in exchange for access to the search engine, YouTube, or the millions of apps in its Play Store.
Such restrictions make it harder for apps that compete with Google’s to win distribution on Android devices. For Microsoft, that means less exposure for its Bing search engine, which is up against Google search. It also could limit growth of other Microsoft software products.
Cyanogen offers an alternate version of the Android mobile operating system free of such restrictions. The 80-person company claims to have a volunteer army of 9,000 software developers working on its own version of Android.
“We’re going to take Android away from Google,” said Kirt McMaster, Cyanogen’s chief executive, in a brief interview last week. The next day, at an industry event sponsored by tech news service The Information, McMaster said Cyanogen had raised $100 million to date. Previously the company had disclosed that it raised $30 million of funding. The company spokeswoman declined to make McMaster available for this story.
McMaster said more than 50 million people use a version of the Cyanogen Android operating system, most of whom have installed it in place of their phone’s initial operating system.
To spread adoption more quickly, Cyanogen is working on deals with hardware makers to install the software on their devices. It recently signed a deal with Indian smartphone maker Micromax to ship handsets with Cyanogen’s software and is close to announcing more such deals, say people familiar with the matter.
A third mobile ecosystem as an alternative to rivals Google and Apple could help Microsoft better distribute its apps and services on smartphones.
“Cyanogen may have a greater chance than Microsoft to build a third ecosystem for mobile,” says Rajeev Chand, managing director at Rutberg & Co., an investment bank focused on the mobile industry.
Independent versions of the Android operating system are already popular, particularly in China where Google has struggled to enter the market. In total, these other versions represented 37% of Android shipments world-wide in the third quarter, according to Strategy Analytics.
Smartphone makers and wireless carriers are looking for a standard bearer to offset Google’s growing market power, Chand says.
Prior investors in Cyanogen included Benchmark Capital, Redpoint Ventures, Andreessen Horowitz and Chinese social-networking giant Tencent. New venture capital investors are expected to join the strategic corporate investors in this latest round of funding.@clexp
Source : The Wall Street Journal
