Microsoft-Nokia Deal Rumored To Cost $1B

Speculation abounds over just how much last month's smartphone deal with Nokia will cost Microsoft. The latest estimate comes from a Bloomberg story published on Monday. According to two unnamed sources said to have knowledge of the deal's terms, Microsoft will pay Nokia more than $1 billion for Windows phone promotional and development efforts.

However, it seems that this detail is still under negotiation, and its verity is in question as the deal's terms have not been publicly announced. According to Bloomberg's sources, the agreement would last over five years, but it is unclear whether the promo payments would recur annually.

The sources also told Bloomberg that Microsoft agreed to pay more than $1 billion for this part of the deal to ensure that Nokia would not select Google's Android operating system instead of the Windows Phone 7 OS.

A comment made by Nokia CEO Stephen Elop at the time of the deal's announcement -- that the deal would generate "billions" in value for Nokia -- had been interpreted as a direct payment by some when the deal was first announced. Later press accounts debunked this idea. An Engadget story cited Elop as indicating that there would be no cash transfer to initiate the deal.

It appears that much of the revenue exchange for both companies will come from leveraging each others' intellectual property for use in Nokia's Windows phone and paying the associated royalty fees.

Nokia's Windows phone is currently under development and Microsoft expects the devices to see the light of day in a volume release sometime in 2012, according to Andy Lees, president of Microsoft's Mobile Communications Business unit. Microsoft is planning a major update release for Windows Phone 7 phones in the second half of this year. That update will add Internet Explorer 9, access to Windows Live SkyDrive and integration with Twitter.

About the Author

Kurt Mackie is senior news producer for 1105 Media's Converge360 group.