Nokia will end up owing $650 million to Microsoft

In case you've just landed from another planet and didn't know, Microsoft and Nokia have a financial deal in place. According to this deal, Nokia uses Windows Phone on their smartphones and  receives money from Microsoft every quarter in the form of "platform support payments." At the same time, Nokia pays Microsoft some licensing fees for its mobile OS.

This is the deal that was set up between Stephen Elop, Nokia's CEO, and Microsoft back in 2011. But according to a financial report filed by Nokia, in the end, the Finnish company will end up paying an extra $650 million. That takes into consideration all the money the company receives from Microsoft which amounts to approximately $250 million every quarter. The official statement reads:

As a result, the remaining minimum software royalty commitment payments are expected to exceed the remaining platform support payments by a total of approximately EUR 0.5 billion over the remaining life of the agreement.  

The statement also mentions that for 2012 the amount of cash received from Microsoft was larger than the amount Nokia had to pay to license the OS and this added to the company's bottom line. The same is expected to happen in 2013, though the resulting profit will be less than it was last year.

Nokia also stated that it expects its smartphone and service business to outperform the general market and they expect a margin of at least 10 percent. The company is also aiming between 5-10 percent profit for its Nokia Siemens business.

Source: TechCrunch

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32 Comments

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not saying information is wrong in the article but the way it has been presented is not the "right" way to look at this situation.

Nokia is paying royalties to license WP from MS. Nokia also has been received $250 million every quarter ($1 billion/year) for support from Microsoft. Up until now, Nokia hasn't been selling many Lumia devices so $250 million from MS resulted in net cash for Nokia. However, Nokia Lumia line has gain significant momentum last year and going forward which will result into Nokia paying more royalties to MS because they are selling more devices.

It is a win-win situation for both companies. But of course, we have MS haters out in full force saying Nokia should've went with Android. What many of you fail to realize is that Nokia would end up paying both Google and MS for Android while their own division such as Nokia Maps would be a waste and they would not be able to take advantage of their own research and technology.

Just my 2 cents

scumdogmillionaire said,
Microsoft needs to let Nokia license Windows Phone OS for free for as much work as NOKIA is putting into it. They're the only ones driving WP at the moment.

Agreed. Or at least wave the fees for now until Nokia starts to make more of a dent in the market.

scumdogmillionaire said,
Microsoft needs to let Nokia license Windows Phone OS for free for as much work as NOKIA is putting into it. They're the only ones driving WP at the moment.

so Microsoft should let Nokia license for free while also paying Nokia platform support fees, while charging other OEMs that are licensing the OS? I don't get it...you guys don't see anything wrong with that?

scumdogmillionaire said,
Microsoft needs to let Nokia license Windows Phone OS for free for as much work as NOKIA is putting into it. They're the only ones driving WP at the moment.

That's why Nokia gets payed the platform support each quarter. Nokia also gets more support and direct access to the OS compared to others so in the end it's really win-win for both sides.

techbeck said,

Agreed. Or at least wave the fees for now until Nokia starts to make more of a dent in the market.

We don't even know what the fees are, they could be $5 per Lumia for all we know, when they can release a sub $200 phone and talk about growing margins I'd say the royalties are small.

ctrl_alt_delete said,

so Microsoft should let Nokia license for free while also paying Nokia platform support fees, while charging other OEMs that are licensing the OS? I don't get it...you guys don't see anything wrong with that?

Nope. Microsoft SHOULD be paying Nokia because they're doing all the leg work to market an MS product. Other OEMs aren't doing jack.

LMAO. So that's the great plan Elop envisioned for Nokia. It seemed 'till now that the reason for Nokia chosing WP as exclusive deal was the cash being offered by MS... well, it seems not to be exactly the case...

Want to differentiate in a market dominated by Android and iOS by chosing an OS with no apps and ending up paying 0.5 billion USD instead of zero. What a plan... Stick it in your ass, Elop&Nokia.

I'm sorry to say (well, not quite sorry...) that to WP fans, but the long-term future is for free OSes like Android, Linux.

Is a matter of when, not if when Linux will take over Windows. When PC will be more or less a browser running different apps, with standardized, multi-platform frameworks/languages like Javascript/HTML etc., I see no reason people would pay for an OS.

Now, go ahead and blow your hate against me.

Edited by Dot Catrix, Mar 7 2013, 5:54pm :

Free OS's like Android? I'm sorry, every OEM is paying royalities to MS on Android so it's far from free.

And yes, going WP was Nokias way to get money from MS, at least that gave them a new life.

When Linux takes over Windows? Wow...I can't even count anymore how many years I've heard that but I guess we'll see.

alwaysonacoffebreak said,
Free OS's like Android? I'm sorry, every OEM is paying royalities to MS on Android so it's far from free.

And yes, going WP was Nokias way to get money from MS, at least that gave them a new life.

When Linux takes over Windows? Wow...I can't even count anymore how many years I've heard that but I guess we'll see.


The OS itself is free, I am not aware of Samsung paying any royalties to Google. On the other hand, we all know how the software patent system works... you cannot say the OS is not free only for the fact Microsoft hates it and started a war with Android phone manufacturers.

Mortis said,
LMAO. So that's the great plan Elop envisioned for Nokia. It seemed 'till now that the reason for Nokia chosing WP as exclusive deal was the cash being offered by MS... well, it seems not to be exactly the case...

Want to differentiate in a market dominated by Android and iOS by chosing an OS with no apps and ending up paying 0.5 billion USD instead of zero. What a plan... Stick it in your ass, Elop&Nokia.

I'm sorry to say (well, not quite sorry...) that to WP fans, but the long-term future is for free OSes like Android, Linux.

Is a matter of when, not if when Linux will take over Windows. When PC will be more or less a browser running different apps, with standardized, multi-platform frameworks/languages like Javascript/HTML etc., I see no reason people would pay for an OS.

Now, go ahead and blow your hate against me.

good for you. I won't spew any hate at you. everyone has their own opinion and that is yours. but until "free" OSs take over I'll continue using and enjoying what works best for me. if the Nokia had a bigger screened phone I would've most likely gone Nokia instead of this Samsung Note2.

Mortis said,

The OS itself is free, I am not aware of Samsung paying any royalties to Google. On the other hand, we all know how the software patent system works... you cannot say the OS is not free only for the fact Microsoft hates it and started a war with Android phone manufacturers.

All Android OEMs have to pay royalties to Google for carrying Google branded apps such as Gmail, Maps, Play - you know the stuff which makes it usable. This was the case back in the day, not sure if it has changed.
You only get free OS if you stay out of OHSA like Amazon/B&N do with their tablets.

Mortis said,

The OS itself is free, I am not aware of Samsung paying any royalties to Google. On the other hand, we all know how the software patent system works... you cannot say the OS is not free only for the fact Microsoft hates it and started a war with Android phone manufacturers.

How exactly does it matter if Samsung is paying Google or Microsoft? It's still no free for them.

But okay. You got your opinion and I got mine, lets leave it at that.

Mortis said,
LMAO. So that's the great plan Elop envisioned for Nokia. It seemed 'till now that the reason for Nokia chosing WP as exclusive deal was the cash being offered by MS... well, it seems not to be exactly the case...

Want to differentiate in a market dominated by Android and iOS by chosing an OS with no apps and ending up paying 0.5 billion USD instead of zero. What a plan... Stick it in your ass, Elop&Nokia.

I'm sorry to say (well, not quite sorry...) that to WP fans, but the long-term future is for free OSes like Android, Linux.

Is a matter of when, not if when Linux will take over Windows. When PC will be more or less a browser running different apps, with standardized, multi-platform frameworks/languages like Javascript/HTML etc., I see no reason people would pay for an OS.

Now, go ahead and blow your hate against me.

not saying information is wrong in the article but the way it has been presented is not the "right" way to look at this situation.

Nokia is paying royalties to license WP from MS. Nokia also has been received $250 million every quarter ($1 billion/year) for support from Microsoft. Up until now, Nokia hasn't been selling many Lumia devices so $250 million from MS resulted in net cash for Nokia. However, Nokia Lumia line has gain significant momentum last year and going forward which will result into Nokia paying more royalties to MS because they are selling more devices.

It is a win-win situation for both companies. But of course, we have MS haters out in full force saying Nokia should've went with Android. What many of you fail to realize is that Nokia would end up paying both Google and MS for Android while their own division such as Nokia Maps would be a waste and they would not be able to take advantage of their own research and technology.

Just my 2 cents

I can't believe you are the first one with this reply!

If they have to pay more money in royalties, then it means they are selling more devices. That sounds pretty good to me! Win Win

Mortis said,
LMAO. So that's the great plan Elop envisioned for Nokia. It seemed 'till now that the reason for Nokia chosing WP as exclusive deal was the cash being offered by MS... well, it seems not to be exactly the case...

Want to differentiate in a market dominated by Android and iOS by chosing an OS with no apps and ending up paying 0.5 billion USD instead of zero. What a plan... Stick it in your ass, Elop&Nokia.

I'm sorry to say (well, not quite sorry...) that to WP fans, but the long-term future is for free OSes like Android, Linux.

Is a matter of when, not if when Linux will take over Windows. When PC will be more or less a browser running different apps, with standardized, multi-platform frameworks/languages like Javascript/HTML etc., I see no reason people would pay for an OS.

Now, go ahead and blow your hate against me.

I used to believe that, in 2002.

Three questions... What are the highest and lowest market shares Linux has had in the last 15 years? What is the trend of market share over that time? Why, after so long, has Linux never, ever, seemed to catch on?

We know it's not the price...

StandingInAlley said,
They really should ditch WP and start working on Android based phones *sighs*

They are fine. MS just needs to do a better job with WP8. And Nokia will still have to pay MS something if they went Android.

techbeck said,

They are fine. MS just needs to do a better job with WP8. And Nokia will still have to pay MS something if they went Android.


Exactly. Nokia would be far worse off if they'd gone Android... Instead, they're slowly turning things around, and in this economy, that should be applauded.

techbeck said,

They are fine. MS just needs to do a better job with WP8. And Nokia will still have to pay MS something if they went Android.


Exactly. Nokia would be far worse off if they'd gone Android... Instead, they're slowly turning things around, and in this economy, that should be applauded.

M_Lyons10 said,

Exactly. Nokia would be far worse off if they'd gone Android... Instead, they're slowly turning things around, and in this economy, that should be applauded.
They could have used Android until when they are more successful use Windows Phone. No one seems to care about Sony or LG. Maybe because they aren't a threat to them? $650 million isn't small. Even the 1 billion dollars Samsung-Apple lawsuit became only $450.5 million...

tanjiajun_34 said,
They could have used Android until when they are more successful use Windows Phone. No one seems to care about Sony or LG. Maybe because they aren't a threat to them? $650 million isn't small. Even the 1 billion dollars Samsung-Apple lawsuit became only $450.5 million...

I dunno if this wasn't picked up on or if people read it wrong but the $650 million difference is the total at the end of the 5 year deal, it's not for 2013, we're talking about one small part of nokias budget here not the final. The deal ends in 2016 and by then this could very well be a small dent to their growing profits, which is what they said.

tanjiajun_34 said,
They could have used Android until when they are more successful use Windows Phone. No one seems to care about Sony or LG. Maybe because they aren't a threat to them? $650 million isn't small. Even the 1 billion dollars Samsung-Apple lawsuit became only $450.5 million...

Well that makes no sense whatsoever. If they didn't use Windows Phone initially, then who else would be driving the platform forward?

What the industry needs is a strong "third alternative" platform to keep the other two honest, not just another Android clone-phone provider.. Windows Phone is that platform, especially with the downfall of Blackberry. Nokia should stick with it.

TCLN Ryster said,

Well that makes no sense whatsoever. If they didn't use Windows Phone initially, then who else would be driving the platform forward?

What the industry needs is a strong "third alternative" platform to keep the other two honest, not just another Android clone-phone provider.. Windows Phone is that platform, especially with the downfall of Blackberry. Nokia should stick with it.

The problem is not Nokia, MS with its, incomprehensible, snail pace is.

Fritzly said,

The problem is not Nokia, MS with its, incomprehensible, snail pace is.

That doesn't sound like it'll be a problem this year, there are already signs that they're close to finishing GDR2 and that we could see it in April with GDR3 in the summer and blue in the holidays. That's 4 updates in a year, 3 minor and one major. I'd say that's not slow really.

GP007 said,

That doesn't sound like it'll be a problem this year, there are already signs that they're close to finishing GDR2 and that we could see it in April with GDR3 in the summer and blue in the holidays. That's 4 updates in a year, 3 minor and one major. I'd say that's not slow really.

It would not.... If it happens. Portico was ready, supposedly, in November 2012 and people are still receiving it nowadays.

Fritzly said,

It would not.... If it happens. Portico was ready, supposedly, in November 2012 and people are still receiving it nowadays.

That seems to be Verizon, carriers are behind as always but I got it back in mid December.

TCLN Ryster said,

Well that makes no sense whatsoever. If they didn't use Windows Phone initially, then who else would be driving the platform forward?

What the industry needs is a strong "third alternative" platform to keep the other two honest, not just another Android clone-phone provider.. Windows Phone is that platform, especially with the downfall of Blackberry. Nokia should stick with it.

We are talking about how Nokia can be more successful. Not about driving another platform. About driving Nokia to success. Not Microsoft. Even when Nokia helped made Windows Phone to success, Samsung, LG, HTC and Sony will just jump ship and make Windows Phone. The one that benefits the most is Microsoft.