This money helps Redmond cover of the fact that its mobile and Xbox groups are burning serious cash. Microsoft reported the revenue and operating losses of Entertainment and Devices, which was the group that housed Xbox, Windows Phone, and those Android royalty payments.
Sherlund said that this is the reason why the group always appears profitable, when it probably isn’t. If you back out the Android profits, Microsoft is probably losing $2.5 billion on Skype, Xbox, and Windows Phone. Of that, $2 billion in losses are attributable to the Xbox, he claims.
Sherlund wants Microsoft needs to spin out Xbox which doesn't really fit with anything Redmond is doing.