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Microsoft's Billion-Dollar Nokia Deal

By CIOinsight  |  Posted 03-08-2011 Print
Microsoft is reportedly paying Nokia more than $1 billion to port Windows Phone 7 on its hardware. Data suggests the effect on the U.S. market could be negligible.

What does a billion dollars buy you?

If you're Microsoft, it apparently buys you a new manufacturing partner. According to a March 7 Bloomberg report, itself quoting two unnamed sources "with knowledge of the terms," the company plans on paying Nokia more than $1 billion over five years to manufacture handsets running Windows Phone 7.

In return, Nokia apparently plans on paying Microsoft a license fee for every copy of Windows Phone 7 installed on a smartphone. A final contract remains to be signed, however, and some additional payment-structure details may emerge in the meantime.

The partnership between the two tech behemoths will almost certainly alter the mobile landscape in coming years. However, some analysts have expressed reservations over the combined companies' ability to execute in a way that will actually reap benefits.

"If Nokia wanted to leave mobile-operating-system development to another company, IHS thinks Google Inc. and its Android software would have been a better choice," William Kidd, an analyst with IHS iSuppli, wrote in a Feb. 14 research note. "Nokia could have reaped many of the benefits it expects with the Microsoft relationship from either Google or Microsoft. But clearly, the unspecified billions in Microsoft cash payments were an important motivating factor in entering into the deal."


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