Microsoft will pay Finnish phone company Nokia Oyj more than $1 billion US Dollars to promote and develop Windows-based handsets as part of their Windows Phone 7 partnership, according to reports.
As part of the deal, Nokia will pay Microsoft a fee for each copy of Windows used in its phones, costs that will be offset as Nokia curtails its own budget for software research and development, said one of the people, who declined to be identified because the final contract hasn't yet been signed, the people said.
The agreement runs for more than five years, if succeeds, the partnership may benefit both sides financially while helping stave off a smartphone threat from Apple and Google. Nokia shares have dropped 26% since the accord was unveiled Feb. 11, reflecting doubts about the move to adopt Microsoft's operating system, which's less than six months old and has just a few percentage points of market share.
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's 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.