Microsoft to Pay Nokia $1 Billion in Windows Phone Deal

Ryan Whitwam

There has been some back and forth as people try to sort out the details of the Microsoft-Nokia deal. Some said that Nokia was only accepting software and marketing assistance from Microsoft, but many suspected there was a cold, hard cash payoff going on. Today Bloomberg is reporting that Microsoft has committed to pay the Finnish company $1 billion to promote and develop Windows Phone 7 devices .

Nokia will still pay a license fee for each copy of WinPho7 they ship, but that is expected to be more than offset by reductions in in-house research spending. Clearly, Nokia's costs will go down if they abandon several of their internal platforms. As Nokia's margins shrink year after year, analysts agree that the company needs to reduce costs in the short term to remain competitive in the next generation of devices.

Nokia's shares have dropped 26% since the Windows Phone partnership was announced last month. But maybe investors will take heart that the Microsoft funding will hasten Nokia's cost cutting and software development.

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