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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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RE: is this any surprise?
By mcnabney on 3/8/2011 9:36:28 AM , Rating: 1
I think this deal might hurt Nokia in the long run.

MS has extrememly strict requirements, down to what buttons the phone can have where they buttons must go. The Android ecosystem actually allows for very different devices, while there can only be so much variation in a WP7 ecosystem.

Nokia sells a lot of different devices, especially in Europe. They will likely be hamstrung by Microsoft's device and design requirements and end up only being able to field a limited spectrum of devices. That will have to compete with a more attractive variety coming from Asian manufactures. The Me-Too market is already owned by Apple, so Nokia will have to compete for customers that want a nice choice between devices once they choose their platform.
I am also concerned that WP7 won't be found on scaled-down products - which is necessary in Europe which can't force more expensive hardware by subsidizing it with contracts like it can in the US. Should be interesting.


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