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Nokia CEO Stephen Elop
"I'm gonna make him an offer he can't refuse."

Nokia ruffled more than a few feathers when it announced that it would be shacking up with Microsoft when it comes to smartphone operating systems. Feeling the heat from smartphone operating systems like Apple's iOS and Google's Android, Nokia is winding down its efforts with MeeGo and Symbian in order to embrace the nascent Windows Phone 7 (WP7) operating system.

Now, a new report from BusinessWeek suggests that Nokia was offered a sweet deal to go with Microsoft’s WP7 operating system over the rival Android OS. BusinessWeek says that Nokia will receive roughly $1B as a part of a 5-year deal with Microsoft.

Microsoft, of course, will also profit handsomely from its $1B investment if Nokia's WP7 offerings take off in the marketplace. Unlike with Google's freely available Android OS, Nokia will pay Microsoft a royalty fee for each WP7 handset that it sells.

“This gives Microsoft scale and allows Nokia to rip out costs,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying Microsoft shares. “Microsoft is getting the platform boost.” 

Although $1B USD is a nice motivator to adopt WP7, Nokia's Stephen Elop claims that Nokia would have gotten lost in vast sea of me-too Android devices, and that the Microsoft partnership gives it a chance to shine. “A decision to go with Windows Phone creates a very different dynamic. Windows Phone is a challenger. It becomes a three-horse race,” said Elop according to Mobile Beat.

Nokia’s Symbian operating system has been under a constant assault from Android. Android overtook Symbian as the world’s best-selling smartphone operating system in Q4 2010 (33.3 million units versus 31 million units).

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By bplewis24 on 3/7/2011 7:51:03 PM , Rating: 2
Anybody want to predict what that ROI will be like?


RE: Ouch
By mcnabney on 3/8/2011 9:22:43 AM , Rating: 1
The royalty fee is generally between $25-30/device.

So Nokia has to purchase 40 million software licenses over a five year period to balance things out.

Microsoft isn't going to make money on the deal. They are just buying market share. When you can't compete directly, you have to open your checkbook.

RE: Ouch
By bplewis24 on 3/8/2011 1:49:01 PM , Rating: 2
And if they don't gain any significant market share (which is absolutely NOT a given under current conditions), I'd say it amounts to throwing money down a toilet.

It would end up being a good deal to keep Nokia afloat, though. And they (Nokia) can eventually still partner up with Android in the future.


RE: Ouch
By tdawg on 3/8/2011 2:29:35 PM , Rating: 2
Microsoft also gets access to Nokia's IP, so they will benefit from this.

RE: Ouch
By Smilin on 3/9/2011 4:35:03 PM , Rating: 2
Microsoft isn't going to make money on the deal. They are just buying market share.

I don't think you really get any of the big picture. Microsoft is not trying to sell smartphones. Neither is Google. They are selling mindshare and information to obtain an ecosystem. In such an ecosystem is where the real money is made.

WP7 is just there to sell Bing, Ad Revenue, Zune subscriptions, movies, music, TV, profit shares on Netflix,, pandora, Live mesh, office, geo located add placement, apps etc..

A 65billion software company doesn't give two craps about the $25 bucks they make on a phone.

You think others aren't buying marketshare? Go listen to the Beatles and tell me where you end up going.

Mcnabney I'm calling you out: You're an MSFT hater man. A hater...and your arguments suck so bad you make me miss Tony.

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