The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( Trefis) -- Android is the number one smartphone platform in the world with over 500,000 device activations every day. It is one of Google's ( GOOG - Get Report) most successful businesses -- but it doesn't make any money directly from it since it gives away the OS for free to device manufacturers.

However, Google is still on track to make more than $1.3 billion from mobile advertising on Android devices in 2012. Google's Android OS competes mainly with the Apple ( AAPL - Get Report) iOS, Microsoft's ( MSFT - Get Report) Windows Phone 7 and Research in Motion's ( RIMM) Blackberry OS in the smartphone operating system market.

We currently have a Trefis price estimate of $27 for Microsoft, which is in line with the market price.

Since Microsoft has the rights to a lot of patents related to the technology used in Android, it has been able to turn Android into a huge revenue-generating business by entering into patent-licensing agreements with other companies that produce Android devices. Microsoft recently entered patent-licensing agreements with several manufacturers including HTC , General Dynamics, Wistron and Onkyo under which they will pay $5 to $10 for every Android device that they ship. Microsoft is also in talks with Samsung, the top Android device manufacturer, about a patent-licensing agreement under which it would receive $10 to $15 for even Android device by Samsung.

All these patent agreements could generate revenue well in excess of $1 billion for Microsoft by the end of 2012. Currently, Microsoft Office and the Windows operating system are the greatest moneymakers for Microsoft. Android could turn out to be its next billion-dollar business and one of its largest revenue generators.

Check out our complete analysis for Microsoft.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.