Business Technology

Sunday 21 January 2018

Microsoft in $1bn Nokia deal

Details begin to emerge of Nokia’s tie-up with Microsoft’s Windows Phone 7

Nokia Chief Executive Stephen Elop and Microsoft CEO Steve Ballmer. Photo: Getty Images
Nokia Chief Executive Stephen Elop and Microsoft CEO Steve Ballmer. Photo: Getty Images

Matt Warman

Microsoft could pay mobile phone maker Nokia $1bn (€718m) under the terms of the companies’ deal to work closely together on Windows Phone.

Reports confirm, however, Nokia CEO Stephen Elop’s previous statements that Nokia will in turn pay Microsoft a licence to use the Windows Phone software.

Bloomberg reports also confirm that Nokia will offset licencing costs by cutting its own €3.2bn research and development budget.

Nokia’s share price has fallen by 26pc since the deal with Microsoft was announced on 11 February. Although the new deal has still not yet been signed, Bloomberg also reports that some of Microsoft’s money will be paid upfront, while Nokia will begin to pay licence fees once phones are being sold with Windows Phone software.

Microsoft is also set to pay Nokia for the use of its patent portfolio. Speaking at the launch Mr Elop said one reason he signed up with Microsoft rather than Google’s Android mobile phone operating system was that it allowed Nokia to extract value from its skills in mapping technology.

Nokia bought Navteq, a mapping firm, in 2007, and its ‘Ovi Maps’ application has been one of the firm’s few major successes.

Peter Klein, Microsoft’s chief financial officer, told an investor conference last week that the deal was “a very mutually beneficial deal economically for both companies”.

Mr Elop has repeatedly claimed that partnering with Microsoft will add “billions of dollars” to Nokia’s value.

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