According to Bloomberg, Microsoft is paying Nokia $1 billion to adopt Windows Phone.
Microsoft Corp. will pay Nokia Oyj more than $1 billion to promote and develop Windows-based handsets as part of their smartphone software agreement, according to two people with knowledge of the terms.
Nokia will pay Microsoft a fee for each copy of Windows used in its phones, costs that will be offset as Nokia curtails its own budget for software research and development, said one of the people, who declined to be identified because the final contract hasn’t yet been signed. The agreement runs for more than five years, the people said.
A spokeswoman for Nokia said the final contract hasn’t been signed and the company will share further details when they are complete.
Nokia’s royalty payments will help Redmond, Washington- based Microsoft make a profit on the accord even after the payments to Nokia, one person said. Some of the payment to Nokia would be made before the company starts selling the phones, meaning Microsoft bears some upfront cost in the partnership.
The agreement for the more than billion-dollar payment was part of a campaign by Microsoft to keep Nokia from choosing Google’s Android operating system, one of the people said. Nokia also opted for Microsoft because Windows Phone software, which is newer than Android and has a smaller number of handsets for sale, gives Nokia a better chance to stand out, one of the people said.
The agreement also has Microsoft paying Nokia for the right to use its patent portfolio, one of the people said.
Microsoft will use Nokia’s Navteq mapping products for functions such as geolocation services and selling local advertising and coupons tied to a user’s position. If successful, that also could generate additional revenue for Nokia, which will share in the sales. The two companies will also divide revenue from services like search and advertising, Microsoft President Andy Lees said last month.