I think this analysis is actually a good thing.
First up, I think the numbers probably aren’t that far off. Right now MS probably lose quite a lot of money per WP7 phone given the investment they have had to put in to get adoption going (giving away large numbers to staff, developers, advertising and something like $1b to Nokia alone) on top of development costs and infrastructure.
Even if they have sold 5m phones retail with a gross profit of $15 per unit (and I think they are not selling all that fast), they are probably still losing on every unit sold.
Compared with that, the income from Android sales, while modest in terms of total income, is almost pure profit; a few lawyers filing legal threats and signing up contracts, and then pure profit on development and patent costs that (in the case of FAT patents) was spent last century.
If you were a shareholder, would you invest in Steve Ballers business model which is to spend billions trying to reach a point where they might sell say 10m licenses at $15, but competing not only with a free product bankrolled by not only Google but an army of companies like HTC, Samsung and Motorola, but also with a company even larger and more profitable than MS (Apple) which is selling a market leading OS that is far ahead in terms of terms of infrastructure, user base and mature products and design.
Or invest in an alternative business model in which little or nothing is spent or risked, and instead they might sell 100m licenses at $5 each. No competition other than open source developers trying to work around patents? No infrastructure at all, and MS are freed to develop tile like (Win8 looking?) interfaces on-top of Android as with the HTC sense layer, along with partnerships like the Bing in China deal. In fact MS are free to take Android entirely and use it as a mobile platform for .NET etc; its only pride that stops them.
In the end, if even some of the bean counters at MS are thinking about option B, MS has to consider working with platforms that are stronger than them.
They have done this when they ended up supporting iOS by shipping apps for iOS. I always thought that having tools like Visual Studio or Office on all platforms would be a good thing? I know that technically, almost impossible to happen (and MS culture would have to change) but Office 2012 running on Ubuntu or an iPad/Android tablet would be something I would love to see.
I always though MS trying to subvert standards and control the platform was a bad thing; if they make more money off open source, standard platforms that trying to push their own propriety solutions which they control entirely, then we all benefit. If their patents get in the way, developers will route around it (as with GIF, being replaced with PNG) and MS know that.