Microsoft paid Nokia over $1 billion to sway them over

Pocket change for Microsoft

NO WONDER NOKIA’S CEO Stephen Elop was so excited at the Mobile World Congress at Barcelona where he spoke about billions of dollars coming Nokia’s way from Microsoft thanks to Windows Phone 7, as it turns out that Microsoft is giving Nokia in excess of $1 billion in what is being said to be promotional and product development funds. This does of course not come directly from Nokia or Microsoft, but we have a feeling it’s not far from the truth.

The story comes via Bloomberg which wouldn’t publish a story like this without having some pretty solid sources. In the long run Microsoft ought to at least get a share of that money back in licensing fees, as Nokia will still have to pay Microsoft for each Windows Phone 7 license the company installs on its phones. How much Microsoft will charge per license is a different matter and something that is unlikely to become public knowledge anytime soon.

The pay-out from Microsoft does have some stipulations in it though and although the final contract between the two is said to not have been signed as yet, when Nokia dots the i’s and crosses the t’s they’ll be tied into Microsoft’s platform for over five years. That’s a very long time to be tied into a platform which has as yet to prove itself as one of the major mobile phone OSes in the market and with Nokia set to be Microsoft’s driving force, it’ll be interesting to see how things unfold.

Elop’s reasoning was that Nokia will be able to cut cost in the future by moving to the Windows Phone platform, as he suggested that Microsoft would take care of all the software development for Nokia regarding the platform. We’re fairly certain it won’t be that easy, at least not unless Nokia sticks with stock solutions and just put them in a pretty packaging. However, that isn’t going to set Nokia apart from its competitors very much and the company is going to have to come up with something much better than that to win consumers over.

The Bloomberg story goes on to mention that the chump change that Microsoft is about to hand over to Nokia was part of a deal that turned Nokia away from going with the alternative, Google’s Android platform. One of the more amusing comments by someone related to the two companies suggests that “Nokia also opted for Microsoft because Windows Phone software, which is newer than Android and has a smaller number of handsets for sale, [which] gives Nokia a better chance to stand out.” The question is, will it make Nokia stand out the way the company intended, or will it all end up being the biggest failure in Nokia’s history?

Now Microsoft isn’t paying out that much money for nothing and part of the agreement is said to give Microsoft the right to use Nokia’s patent portfolio. Considering that Nokia has been deeply involved with the development of many standards used today, least not GSM and WDCMA, this could be a good thing for Microsoft, even though it’s unlikely that we’ll see another Microsoft branded handset within the foreseeable future. Of course, there’s that little part about Microsoft using Nokia’s OVI map service which is based on Navteq’s technology, a company Nokia bought a little while back. However, this won’t just benefit Microsoft, but also its other Windows Phone 7 partners, as it’ll be an integral part of the platform.

For Nokia it’s just a matter for the company to get its first device(s) out into the market, as without products, things aren’t going to progress in any direction. As much as we like Nokia’s Technicolor renderings of what appears to otherwise be a very typical looking smartphone, Nokia is going to have to come up with something quite extraordinary to win both consumers and business users over to the Windows Phone 7 platform. It’s not an impossible task, but it’s not going to be easy for Nokia, especially if the first devices don’t live up to people’s expectations. Just look at Sony Ericsson, they have more or less dropped all support for Microsoft in favor of Android, despite recent leaks of a Windows Phone 7 prototype which is said to never be entering production.S|A

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