Microsoft Corp will pay Nokia Corp more than US$1 billion to promote and develop Windows-based handsets as part of their smartphone software agreement, according to two people with knowledge of the terms.
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 one of the people, who declined to be identified because the final contract hasn’t yet been signed. The agreement runs for more than five years, the people said.
If it succeeds, the partnership may benefit both sides financially while helping stave off a smartphone threat from Apple Inc and Google Inc.
Microsoft spokeswoman Melissa Havel declined to comment on the specifics of the agreement. Nokia spokeswoman Laurie Armstrong said the final contract hasn’t been signed and the company would share further details when they are complete.
Nokia’s royalty payments would help Redmond, Washington-based Microsoft make a profit on the accord even after the payments to Nokia, one person said. Some of the payment to Nokia would be made before the company starts selling the phones, meaning Microsoft bears some upfront cost in the partnership.
The agreement for the more than US$1 billion payment was part of a campaign by Microsoft to keep Nokia from choosing Google’s Android operating system, one of the people said. Nokia also opted for Microsoft because Windows Phone software, which is newer than Android and has a smaller number of handsets for sale, gives Nokia a better chance to stand out, one of the people said.
The agreement also has Microsoft paying Nokia for the right to use its patent portfolio, one of the people said.
As part of the deal, Microsoft would use Nokia’s Navteq mapping products for functions, such as geolocation services and selling local advertising and coupons tied to a user’s position. If successful, that also could generate additional revenue for Nokia, which would share in the sales. The two companies would also divide revenue from services like search and advertising, Microsoft President Andy Lees said last month.
Meanwhile, Google’s Android has surged past Blackberry maker Research in Motion Ltd to become the leading smartphone platform in the US, market tracking firm comScore said on Monday.
Google’s Android operating system captured the top spot in the US for the first time with a 31.2 percent smartphone market share for the three months ending in January, comScore said.
Research in Motion was next with a 30.4 percent market share, followed by Apple with 24.7 percent, Microsoft with 8.0 percent and Palm with 3.2 percent.
According to comScore, 234 million Americans owned mobile devices at the end of January and 65.8 million owned smartphones.
Samsung Electronics Co was the top handset manufacturer overall with a 24.9 percent share of the US market, comScore said, followed by LG Electronics Inc with 20.8 percent, Motorola Inc with 16.5 percent, Research in Motion with 8.6 percent and Apple with 7.0 percent.