The collaboration includes a cross-licensing and transfer agreement of some 1,500 patents. No monetary terms were disclosed.

Instead of throwing good money after bad in building and selling its own mobile handsets, Microsoft is trying to grow its software presence across various platforms and not just its own Windows operating system.

Starting September, Xiaomi Android devices, including Mi 5, Mi Max, Mi 4s, Redmi Note 3 and Redmi 3, will come pre-installed with Microsoft Word, Excel, PowerPoint, Outlook and Skype applications. Specific offerings may vary by device, market and mobile operator.

Last year, Xiaomi sold 70 million handsets, which fell short of earlier expectations. Meanwhile, Microsoft's own line of Lumia handsets running on Windows is hardly moving.

“As demonstrated by this agreement with Microsoft, Xiaomi is looking to build sustainable, long-term partnerships with global technology leaders, with the ultimate goal of bringing the best user experience to our Mi fans,” says Xiang Wang, senior vice president at Xiaomi.

“People want their favourite apps and experiences to work seamlessly on the device of their choice, and that’s exactly what this partnership offers,” says Peggy Johnson, executive vice president of Business Development at Microsoft.

Earlier this month, Microsoft announced further cuts in its already decimated mobile division.