As the dust settles on the recent Nokia Microsoft announcement it has been revealed that Microsoft is set to pay the Finish company billions.The Wall Street Journal says that during an interview, Nokia boss Stephen Elop outlined the Microsoft payments and other benefits Nokia will receive as a result of the deal between the two companies, under which Nokia will adopt Windows Phone as its main smartphone operating system.
Although Nokia will pay Microsoft an undisclosed royalty for licensing the Windows Phone software for Nokia handsets, Mr. Elop said Nokia will see “very substantial reductions” in operating expenses, including layoffs, because it will no longer need to spend as much to develop mobile software on its own.
There is also speculation that Microsoft could take over distribution of Nokia phones in some markets including Australia with the goods being made offshore and delivered direct to retailers and carriers.
Mr. Elop conceded that Nokia has challenges in regaining lost ground in the mobile market, he said Nokia’s ‘still-commanding market share’ in the handset business gives the company a strong bargaining position in talks with Microsoft as well as with Google.
Mr. Elop said executives at both Microsoft and Google recognised that an alliance with Nokia could have a decisive impact on their mobile fortunes, and were willing to cut deals favorable to Nokia as a result.
“We’re the swing factor,” Mr. Elop said. “We can swing it to Android or swing the industry over to create a third ecosystem.”
A spokesman for Microsoft said the company won’t comment on the financial terms of the deal. Mr. Elop talked by telephone from Barcelona shortly before a Nokia news conference at the Mobile World Congress in Barcelona.
Mr. Elop said the payments Microsoft agreed to make to Nokia as part of the deal will go toward ensuring the success of the Windows Phone devices Nokia makes, including marketing and research-and-development costs aimed at distinguishing Nokia phones from rivals. “Microsoft has placed a value on our decision to go in one direction and not another,” he said.