You'll be inundated with iPhone news today, but the truth is, Microsoft is one of the kings of smartphones. Its technologies power a majority of smartphones today and it's reaping billions of dollars annually from it. And that will accelerate in the future.
I'm talking not about Windows Phone, of course, which by the latest estimate from IDC has a 3.9% worldwide market share. Instead, I'm referring to Android, the world's most popular smartphone operating system, which IDC says has a 75.3% market share.
Microsoft has argued for the last several years that Android uses Microsoft patents, and so manufacturers of Android phones must pay royalties for those patents. Google doesn't agree, but Google isn't a big smartphone manufacturer, so whether Google agrees or not doesn't matter. More important is what the smartphone makers themselves say. And resoundingly, they agree, and pay royalties to Microsoft for every phone they sell.
It's not only smartphone makers who are paying royalties to Microsoft. Companies that make other Android-based devices do as well, such as Nikon, who is paying Microsoft royalties for every Android-based phone it sells. Samsung, HTC, LG Electronics, Sony, Sharp, and many others have signed patent agreements with Microsoft, a total of 20 as of April. Also included is Hon Hai, owner of Foxconn. That deal covers not just Android, but Chrome.
How much money is involved? Just for smartphones, plenty. George Kesarios of Seeking Alpha estimates that Microsoft will make as much as $3.6 billion in 2013 alone from the patents. He bases that number on what he calls the "general consensus" that Microsoft gets $8 on average per Android phone sold, and that Microsoft will get royalties from 60% of 750 million Android devices expected to ship in 2013. By 2017, if you use IDC's numbers for expected shipments of Android phones, that number will grow to $5.5 billion, he says. He notes:
"However, IDC also estimates that Windows Phones will also command about 10% of the market in 2017. So in reality, Microsoft directly or indirectly will have a revenue interest on about 80% of the total smartphone global market by 2017."
If anything, his numbers might be low. Other estimates say that Microsoft could get $4.3 billion in revenue from Android smartphone licensing this year,and $8.8 billion by 2017. And those numbers don't include licensing of other Android devices, such as cameras and TVs. And it doesn't cover Chrome as well.
There's also a chance that Microsoft will use the recent Nokia deal to force Android manufacturers to cough up more royalties, this time around for Nokia patents. Matt Asay on ReadWrite points out that "Nokia has not historically licensed its patents, preferring instead to use them to defend against competitors." But now that Microsoft has those patents, things may change. Nokia spokesman Mark Durrant told Reuters "Once we no longer have our own mobile devices business, following the close of the (Microsoft) transaction, we would be able to explore licensing some of those technologies."
That could lead to a situation in which manufacturers of Android devices may have to pay twice for patents -- once for the ones that Microsoft owns, and once for those that Nokia owns.
Today and tomorrow countless billions of electrons will be consumed and entire forests will be destroyed analyzing every bit of news about the new generation of iPhones. That's as it should be. But the bigger news may be that quietly behind the scenes, Microsoft is becoming a big-money king of smarthphones and other smart gadgets as well.