Microsoft to pay Nokia $1 billion in deal
We have witnessed the sheer depth of Microsoft’s budget when it comes to advertising and marketing campaigns, but who would have guessed they would be providing Nokia $1 billion for them to further promote and develop Windows Phone 7? The partnership between the two giants could prove to be what the platform needs to combat Google and Apple with competition.
“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 an unidentifiable life-form (due to the contract not being finalized as of yet), continuing on to state that “the agreement runs for more than five years,” which sounds like an interesting accommodation, should the contract be signed.
If successful, this agreement will allow Nokia and Microsoft to financially benefit from the newly formed partnership, which is perfect since shares in Nokia are being negatively affected by Earths gravity and WP7 (incl. WinMobile) was recently shown to have experienced a slight dip in market share.
Colin Gillis, an analyst at BGC Partners based in New York, recommends investing in Microsoft shares and explained that "This gives Microsoft scale and allows Nokia to rip out costs," and concludes with the observation that "Microsoft is getting the platform boost that comes from acquiring a Nokia for about a billion dollars."
Included as part of the deal, Microsoft will be using Nokia owned Navteq mapping products for geolocation services among other functions, as well as selling local advertising and coupons tied to a user's position. Both companies will be set to share revenue in the above and also search & advertising - I would hazard a guess with Bing and AdCentre. Peter Klein, Chief Financial officer at Microsoft, explained last week that “in success, it is a very mutually beneficial deal economically for both companies,”
A very promising update from the ‘Nokiasoft’ formation, but one must ask the question - what about the other manufacturers/vendors? When we originally covered the potential deal between Nokia and Microsoft, a good section of the conversation was covering the “special treatment” Nokia could receive from Microsoft. What are your thoughts on the upcoming deal, and do you think this will positively (or negatively) affect Windows Phone 7?
Source: Business Week