Microsoft has agreed to pay Nokia more than $1 billion over five years for choosing its Windows Phone platform to power future smartphones, Bloomberg reports.Microsoft is offering some of the money up front to help Nokia market and develop the phones, and the total payments are spread over five years. It will hope to earn its investment back from royalties as Nokia begins to sell Windows phones.
Nokia will have to sell more than 60 million phones, as Microsoft is estimated to charge no more than $15 per handset for Windows Phone.
That’s quite likely, assuming Nokia’s business doesn’t collapse between now and 2012, when the deal is likely to start: Nokia sold more than 100 million Symbian handsets in 2010.
Having a competitive smartphone platform is also important to protect Microsoft’s core enterprise software business against non-Windows platforms like the iPhone/iPad and Android.
The report is the first to put a number on the deal. Intel CEO Paul Otellini earlier said that Microsoft paid “incredible” money so Nokia would choose it instead of Google’s Android platform.