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.

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7 Responses to $1,000,000,000

  1. shayaanf says:

    Seems like MS is going the same way they did with XBox and game developers. They are pushing Windows Phone hard, and they are playing to win.

    I like this attitude. If only they’d adopt it for the tablet market. But then again, they don’t have a tablet OS that’s worth a damn so I suppose I’m a little optimistic. Hey, you hear the Courier is making a comeback, right?!?

  2. cpdjoe says:

    pretty sure i’ve read that they are the os for a forthcoming dell tablet

  3. vhaakmat says:

    $1B is a fair amount to pay, and MS has the money. If they can deliver carrier independent phones, I would happily switch my Omnia 7 for a Nokia.. I am tired of waiting for my update. Microsoft needs to give me 1 good reason not to switch to iPhone or Android. Both my HD7 and Omnia 7 are still on the 7004 release. If with a handful of phones it takes so long to be next to et the update, imagine if they had sold millions

    • markoo says:

      I got the update on my Omnia 7 last Sunday. Be patient. It’s not like it’s mind-blowing! The update was so fast I wasn’t sure if it actually happened :-) Was used to slooooow update on my iPhone 3GS.
      Could easily see myself buying a Nokia WP7 next time.

  4. roberthleeii says:

    I think this is a great deal!

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