Microsoft will pay Nokia $1 billion as part of its deal to put Windows Phone software on Nokia smartphones
As part of the deal, Nokia agreed to adopt the Windows Phone platform for its devices in place of Symbian, but the companies revealed few details of how the partnership would work.
Under the agreement, which will last for more than five years, Nokia will pay Microsoft a licensing fee for each copy of Windows used in its handsets, according to the report.
The deal will allow Nokia to cut its own costs by scrapping its research and development activities related to the Symbian OS, while giving Microsoft greater economies of scale in promoting its Windows Phone software, analysts have said.
Nokia has already begun selling off its Symbian-related assets, announcing on Monday that it would sell off its Qt application framework business.
Microsoft and Nokia are both facing increasingly vigorous competition from Apple and Google, as well as other smartphone makers such as RIM.
A Nokia spokeswoman told Bloomberg that the final contract hasn’t yet been signed, saying the company will release more details when they have been finalised.
Microsoft will make a profit on the deal even after the payments to Nokia, which will begin before Nokia starts selling Windows handsets, according to Bloomberg.
The payment agreement was part of a wider Microsoft campaign to prevent Nokia from choosing Google’s Android smartphone platform, Bloomberg said. Nokia chose it partly because it gives the company a better chance to stand out, according to the report’s sources.
Microsoft will also pay Nokia for the right to use Nokia’s patent portfolio and as part of the deal will use Nokia’s Navteq mapping products for services such as geolocation and local advertising. Nokia and Microsoft will share the revenues from such services as well as services such as search and advertising, the report said.