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Microsoft to pay billions to Nokia

NOK, MSFT, GOOG, LGERF

Nokia Corp. (NYSE:NOK) will get billions of dollars from Microsoft Corp.(NASDAQ:MSFT) to drop its current SmartPhone software for Windows Phone 7, Nokia CEO Stephen Elop said Sunday.

Nokia, the World’s largest maker of phones, and Microsoft announced their alliance Friday. Both investors and employees reacted: Nokia’s stock fell 14%, and Finnish employees used flex time and wentt home early.

On Sunday, a day ahead of the start of the Mobile World Congress cell phone trade show in Barcelona, Mr. Elop told the press, analysts and industry players that apart from the benefits of the alliance that were laid out Friday, Microsoft is paying Nokia billions of dollars to switch to Windows Phone 7. “This is something I don’t think was completely explained,” Elop said.

Elop, a former Microsoft executive, said Finland-based Nokia had been courted by Google Inc.(NASDAQ:GOOG) as well, which sought to convince it to use its popular Android software for smart phones. Microsoft’s payments are recognition that Nokia had “substantial value to contribute,” said Elop.

Redmond, Wash.-based Microsoft introduced Windows Phone 7 last year, on phones made by LG Electronics Inc. (PK:LGERF) and HTC Corp. (TW:2498), but has only captured a small part of the SmartPhone market, according to analysts.

Nokia’s worldwide market share in smart phones was just over 30% in last year’s Q-4, down from 40% a year earlier. Those phones use Symbian, a relatively old software package that was not designed to be used with touch screens.

Money and in-kind contributions will flow both ways in the deal, Mr. Elop said. Nokia will be contributing its Ovi mapping service and will be paying Microsoft royalties for the use of its software, as other manufacturers do. It will save money by not continuing development of its own software. The net benefit is still in the billions, he said.

Analysts believe Google pays manufacturers to use Android, but no figures have come to light.—Paul A. Ebeling, Jnr. www.livetradingnews.com