Microsoft will reportedly pay Nokia more than $1 billion for the promotion and development of a Windows Phone operating system for their highly-popular handsets, reports Bloomberg Businessweek. The news comes from “two people with knowledge of the terms,” who refused to be named.
According to the deal, Microsoft will receive payment from Nokia for every copy of Windows used on one of their devices. That payment will be offset, however, by money Nokia will save in research and software development costs — which will now be covered by Microsoft, who is currently developing a new version of Windows to follow Windows Phone 7.
News of the $1 billion payment from Microsoft comes as little surprise to anyone who’s been paying close attention to the deal, as Nokia CEO Stephen Elop announced at this year’s Mobile World Congress in February that Microsoft had committed “billions of dollars” to bring Windows Phone OS to Nokia, which still holds the title of “world’s largest handset maker, despite sagging numbers.
Microsoft allegedly agreed to pay such an amount to keep Nokia from choosing Google’s Android OS as its operating system of choice.
The two technology giants hope that by joining forces they can fight back the current bludgeoning they’re receiving from Apple’s iOS and Android in the smartphone arena. Ominous signs have already begun to emerge, however, with Nokia shares having already dropped 26 percent since its deal with Microsoft was announced on February 11.
Rumors indicate that Nokia will not release any phones based on the Windows Phone OS — which the company has adopted as its primary operating system — until late this year, possibly October.
The deal, sources say, is expected to last at least five years. To put that in context, Apple will presumably be on iPhone 10 by the time the Microsoft-Nokia partnership expires.
