Winextra – Microsoft and Nokia’s Billion Dollar Handshake

The billion dollar handshake

Even while it was still a rumor tech pundits were speculating that any deal between Microsoft and Nokia would have to include Microsoft paying billions of dollars to Nokia for them to hop on the Windows Phone 7 bandwagon.

After the announcement by Microsoft CEO Steve Ballmer and Nokia’s CEO Stephen Elop shook hands and had big smiles on their faces over the prospect of a better future for both companies. However it turns out that Elop may have had even more reasons to smile.

According to a report out today by Bloomberg, Microsoft will be paying Nokia just over one billion dollars to promote and develop Windows Phone 7 based handsets with a large portion of that money payable prior to and handsets being delivered to the retail channels.

Also a part of a deal that will run for more than five years Nokia has agreed to pay Microsoft a fee for each handset made that uses the Windows Phone 7 operating system.

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.

As part of the deal, 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.

via Bloomberg.

Of course this will have the Microsoft naysayers yacking on about how Microsoft has to buy its way into relevancy but really who cares as long as in the long run the success of Windows Phone 7 is moved forward.