Nokia announced last month that it was switching to Windows Phone as its primary smartphone platform. The two companies have not yet reached a final agreement; that will be signed in the next few months. A new rumor has sprung up, however, suggesting that Microsoft is paying Nokia more than $1 billion as part of the deal, according to "two people with knowledge of the terms" cited by Businessweek:
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 hasnt yet been signed. The agreement runs for more than five years, the people said.
The agreement for the more than billion-dollar payment was part of a campaign by Microsoft to keep Nokia from choosing Googles 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.
We've heard something similar before. Last month, Nokia CEO Stephen Elop told analysts and industry players that apart from the benefits of the alliance that have already been explained, "the value transferred to Nokia is measured in the Bs, not the Ms."