Microsoft paying Nokia more than $1 billion in Windows Phone 7 partnership

Microsoft will pay Finnish phone company Nokia more than one billion US Dollars as part of the pair's new Windows Phone 7 partnership according to reports.

Dina Bass, writing for Bloomberg's Business Week claims that sources close to the matter have told Bloomberg that the Redmond outfit will make a payment upfront, even before Nokia starts to ship finished hardware to customers.

As part of the yet-unsigned deal, Nokia will pay an undisclosed fee to Microsoft for each copy of Windows Phone 7 sold, though reduced costs in its own software development will offset this expenditure according to an un-named source. Last year Nokia spent a staggering 3 billion Euros in R&D and it's believed the firm could cut as much as a third of that moving forward.

The deal, which is believed to run for five years is expected to be beneficial for both parties, with Microsoft gaining a new partner with a track record for impressive hardware, and Nokia being able to reduce costs while still being in possession of a potentially strong software platform for its handsets.

While news of the Microsoft deal has hit Nokia share prices hard - shares fell 26 percent after the announcement - few would argue the Finnish giant's existing hardware and software lineup was a successful one. With Nokia's operating margins reducing year on year, and market share being devoured by Apple's iPhone and Google's Android OS, Nokia's outlook was bleak. 

It's not all been plain-sailing for Microsoft's OS of late either. A recent software update to Windows Phone 7 had to be pulled due to an issue with certain Samsung hardware. The platform has also had its critics both in the media and on the high-street due to the lack of basic features such as copy & paste as well as multi-tasking. 

Many believe the partnership between Nokia and Microsoft was one borne more out of desperation than choice on Nokia's part. Whether it will be the correct deal to make in the long-term remains to be seen.

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44 Comments

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What other WP7 Manufacturers are thinking right now: "Wait... aren't *we* paying *Microsoft* to be able to make WP7 phones?"

lunarworks said,
What other WP7 Manufacturers are thinking right now: "Wait... aren't *we* paying *Microsoft* to be able to make WP7 phones?"

I think there's more going on behind the scenes than the reality TV drama you're projecting.

lunarworks said,
What other WP7 Manufacturers are thinking right now: "Wait... aren't *we* paying *Microsoft* to be able to make WP7 phones?"

The deal probably involves an exclusivity clause, meaning that Nokia won't be making any phones with another OS. Additionally, you did notice that Nokia will be paying MS a percentage of the profits for each phone they sell with WP7, right?

Typical microsoft throwing money around. This is how they solve all their issues just throw some money at so-n-so. Least innovative company ever.

Shea J said,
Typical microsoft throwing money around. This is how they solve all their issues just throw some money at so-n-so. Least innovative company ever.

They make horrible decisions. I love Microsoft, but it seems like they can't branch off from what they originally done successfully. They are still strong with Windows OS and Office Productivity Software. However you get to the new branches and Google and Apple have stolen it from them.

Zune anyone?
Netbook with the same operating system as a desktop computer?
Seriously?

UndergroundWire said,

They make horrible decisions. I love Microsoft, but it seems like they can't branch off from what they originally done successfully. They are still strong with Windows OS and Office Productivity Software. However you get to the new branches and Google and Apple have stolen it from them.

Zune anyone?
Netbook with the same operating system as a desktop computer?
Seriously?


Uh, the tablet argument might be legit regarding desktop Windows, but on a netbook Windows 7 is a FAR nicer experience than Ubuntu Netbook Remix. MeeGo for netbooks was dead before the Microsoft deal with Nokia, and Jolicloud is what Chrome OS wishes it could be (and as a result, will never take off--because Google has far more weight to throw around). Frankly, when Linux can play back full screen Hulu on a netbook as smoothly as Windows 7 can play back fullscreen NETFLIX on a netbook, I'll revisit your opinion. Until then? Moot.

Joshie said,

Uh, the tablet argument might be legit regarding desktop Windows, but on a netbook Windows 7 is a FAR nicer experience than Ubuntu Netbook Remix. MeeGo for netbooks was dead before the Microsoft deal with Nokia, and Jolicloud is what Chrome OS wishes it could be (and as a result, will never take off--because Google has far more weight to throw around). Frankly, when Linux can play back full screen Hulu on a netbook as smoothly as Windows 7 can play back fullscreen NETFLIX on a netbook, I'll revisit your opinion. Until then? Moot.

You're missing my point.

Netbooks are far too slow to run Windows. Microsoft should have been first to come out with a tablet device. An OS designed to run on tablets and netbooks. Microsoft Failed on that Front.

And I don't think anyone can argue that Microsoft made poor decisions with Zune. They didn't market the device correctly (as in internationally) , they didn't price it competitively (seriously when the price is so close, people are gonna go with what they know).

UndergroundWire said,

You're missing my point.

Netbooks are far too slow to run Windows. Microsoft should have been first to come out with a tablet device. An OS designed to run on tablets and netbooks. Microsoft Failed on that Front.

And I don't think anyone can argue that Microsoft made poor decisions with Zune. They didn't market the device correctly (as in internationally) , they didn't price it competitively (seriously when the price is so close, people are gonna go with what they know).

I don't get how I missed your point, or what the Zune has to do with my comment. You're saying netbooks are too slow for Windows as if to clarify against my post that Windows runs just fine on netbooks.

I used an EeePC 900 for over a year before ditching it because the form factor itself is a failure. Ubuntu was easily the most sluggish OS out of all the ones I tried on it (and good god I tried them all). Android on a netbook ultimately just feels like Ubuntu if every window/dialog was full screen. Chrome OS is a joke. MeeGo was snappy but clumsy. Jolicloud was quick enough, and good as a cloud OS, but suffered the same sluggishness with multimedia that all Linux distros suffer on low-end hardware.

Windows 7 had the hands-down best performance on that little piece of crap hardware. It booted very quickly (mind you, I had an SSD model netbook), ran smoothly, and could play netflix while Word was open without jitters. If you seriously think Windows 7 is a poor performer on small form factors, then good lord man, what OS *IS* good on a netbook? Because it sure as hell isn't 99% of Linux.

Since I lacked a Windows license I was willing to give up with the netbook, I sold it with Jolicloud, because it was the ONLY free OS I had encountered that didn't make me want to microwave the damn thing.

What does it matter? Microsoft and Nokia formed a partnership. The terms are what they both see as amicable and is of little concern to the rest of us. The only thing we care about is the results of that partnership. It is still too early to see where that will land us.

The headline is misleading... It's more about revenue sharing... this what Nokia wanted and Google was unwilling to give them.

Raa said,
Hahaha, I knew there was a payoff!!
Nokia should take the money and run for it IMO.

Of course there was, but 1billion is a bad deal. Hopefully nokia's board will insist that wp7/wp7.5/wp8 handsets stay in usa..

Otherwise nokia is doomed.

krustylicious said,

Of course there was, but 1billion is a bad deal. Hopefully nokia's board will insist that wp7/wp7.5/wp8 handsets stay in usa..

Otherwise nokia is doomed.

You think one BILLION upfront before nokia does *anything* with WP7 is a bad deal? Good grief how much money do you want for doing nothing?

(Don't tell me you're a lawyer)

krustylicious said,

Of course there was, but 1billion is a bad deal. Hopefully nokia's board will insist that wp7/wp7.5/wp8 handsets stay in usa..

Otherwise nokia is doomed.

No, Nokia will just go along with Android if WP7 struggles for a year with Nokia.

UndergroundWire said,

No, Nokia will just go along with Android if WP7 struggles for a year with Nokia.


They probably signed an agreement with the payoff that prevents them from doing that. Otherwise Microsoft would have done a useless deal.
Anyway, nothing that we didn't knew already, Nokia sold its soul to Microsoft for peanuts.

Lets hope they can come out with decent handset as the current crop of WM7 handsets lag way behind their Android counterparts

Hackersoft MS MVP said,
Lets hope they can come out with decent handset as the current crop of WM7 handsets lag way behind their Android counterparts

In what way do the current WP7 handsets lag behind?

neo158 said,

In what way do the current WP7 handsets lag behind?

None of them have front facing cameras or dual-core processors, these two would be a big improvement.

Hackersoft MS MVP said,
Lets hope they can come out with decent handset as the current crop of WM7 handsets lag way behind their Android counterparts

So true.

thealexweb said,

None of them have front facing cameras or dual-core processors, these two would be a big improvement.

Is Dual Core REALLY a must have on any phone, OK maybe on Android it is, but WP7 performs just fine using the current generation of processors.

Front facing cameras are coming, however, I personally don't see them as a necessity considering I gave up on video calls when I got my HTC Desire.

Might be a good idea to try the current WP7 handsets before making these kind of statements.

thealexweb said,

None of them have front facing cameras or dual-core processors, these two would be a big improvement.

None of the Android phones had dual-core processors either until after WP7 devices hit the market.

thealexweb said,

None of them have front facing cameras or dual-core processors, these two would be a big improvement.

ohhhhh man .. they dont need dual cores.. thats the whole point of the OS.. it is simple and easy .. they want similar hardware between phones so that the experience is constant

Hackersoft MS MVP said,
Lets hope they can come out with decent handset as the current crop of WM7 handsets lag way behind their Android counterparts

I think it's safe to say Nokia makes decent headsets.

MS currently has beautiful phones on the market!

thealexweb said,

None of them have front facing cameras or dual-core processors, these two would be a big improvement.

well since WP7 on a single core performs better and smoother than a dual core android, I don't see the problem.

neo158 said,

Is Dual Core REALLY a must have on any phone

If the phone intends to support third party multitasking, absolutely, it's a must. Even without that though, it does improve the overall performance.
neo158 said,

, OK maybe on Android it is, but WP7 performs just fine using the current generation of processors.

It's a significant feature which is lacking in current WP7 phones.
neo158 said,

Might be a good idea to try the current WP7 handsets before making these kind of statements.

I believe these are valid criticisms. WP7 handsets and the software that resides on them are lagging behind in features compared with Android phones.

Hackersoft MS MVP said,
Lets hope they can come out with decent handset as the current crop of WM7 handsets lag way behind their Android counterparts

WP7 devices will be dual core before long as well. The hardware divide between android and WP7 devices is practically non-existant, there's nothing stopping any manufacturer popping WP7 onto the same hardware they're using for any of their android devices (In much the same way that the HTC HD2 is very similar to the Nexus One/HTC Desire, to the point where the first Android build to run smoothly on the HD2 was more or less a stock Desire ROM).

I'm finding this hardwaare discussion rather pointless, considering the hardware for any smartphone these days is pretty much the same: ARM cortex-a9 processor, similar ram, similar camera, same sensors, etc. perhaps graphics performance differs, but the rest is pretty much comparable.
And whoever says that "wp7 doesn't need dual core", well, neither did XP, yet there were still performance gains.

Julius Caro said,
I'm finding this hardwaare discussion rather pointless, considering the hardware for any smartphone these days is pretty much the same: ARM cortex-a9 processor, similar ram, similar camera, same sensors, etc. perhaps graphics performance differs, but the rest is pretty much comparable.
And whoever says that "wp7 doesn't need dual core", well, neither did XP, yet there were still performance gains.

There will be potential performance gains (remember for a multi-core processor to be fully utilized you need multi-core optimized programs which is rare on the desktop and even rarer in the mobile space) at some point, but for now it is marginally there.

I would be willing to hold off on Dual Core until the power draw drops enough to not be too much of a hit to battery life.

Flawed said,
I believe these are valid criticisms. WP7 handsets and the software that resides on them are lagging behind in features compared with Android phones.

They are valid points, but upgrading hardware and software simply to "keep up with the joneses" is stupid.

You also need to take into account that Android completely lacks any Hardware Acceleration for the GUI, so a dual core processor is more useful for Android Handsets.

Also, remember that Microsoft showed off third party apps multitasking on a CURRENT GENERATION WP7 handset.

HawkMan said,

well since WP7 on a single core performs better and smoother than a dual core android, I don't see the problem.

1) Android 2.2 doesn't support multicore processors. It's implemented in 3.0 and maybe implemented when Gingerbread is finalized.

2) If you expect future decent games, Windows Phone 7 HAS TO go dual core to compete with the iPhone and the future developments for Android multicore processor.

3) Windows Phones 7 they way it is currently written doesn't support multicore processor. You have to wait for a future iteration

UndergroundWire said,

1) Android 2.2 doesn't support multicore processors. It's implemented in 3.0 and maybe implemented when Gingerbread is finalized.

2) If you expect future decent games, Windows Phone 7 HAS TO go dual core to compete with the iPhone and the future developments for Android multicore processor.

3) Windows Phones 7 they way it is currently written doesn't support multicore processor. You have to wait for a future iteration

You do know that WP7 is based on a Windows CE 6.0/7.0 hybrid core and that the CE 7.0 core supports dual core CPUs

else

source!!!!

UndergroundWire said,

2) If you expect future decent games, Windows Phone 7 HAS TO go dual core to compete with the iPhone and the future developments for Android multicore processor.

This idea comes from where? Dual core gaming is only just starting to become common for PC games... PCs have had Dual Core CPUs for almost a decade now.

GPUs will be far more important for mobile gaming than Dual Core CPUs.

The biggest gains for Dual Core can come from Multi-Tasking senerios where the OS can offload the tasks to seperate cores at best.

Frazell Thomas said,

There will be potential performance gains (remember for a multi-core processor to be fully utilized you need multi-core optimized programs

That's not strictly true. Each process (instance of a program) in a modern OS has a single main() thread created for it by default by the kernel. The preemptive multitasking scheduler will then perform the necessary context switching. Therefore, each process can potentially run concurrently depending on the number of cores, hyperthreading type features, and how many threads are sleeping/active.

Most applications simply don't need multiple threads. A single entry point and blocking/non blocking main loop is usually quite efficient. This way, the program just wakes up to process the data, then the main thread goes back to sleep when it's done. Well at least for a background task. Although user input loops work almost identically.

Frazell Thomas said,

I would be willing to hold off on Dual Core until the power draw drops enough to not be too much of a hit to battery life.

Dual cores are efficient in terms of power envelopes because they use a shared die. There's no excuse not to have a dual core processor in all smart phones today. The reason it wasn't a priority for Microsoft is because WP7 doesn't support third party multitasking.

Frazell Thomas said,

This idea comes from where? Dual core gaming is only just starting to become common for PC games... PCs have had Dual Core CPUs for almost a decade now.

GPUs will be far more important for mobile gaming than Dual Core CPUs.

The biggest gains for Dual Core can come from Multi-Tasking senerios where the OS can offload the tasks to seperate cores at best.

i guess you mean dual socket system

earliest fused/same-package cpu was around 6 years ago==> athlon X2 ,Pentium D