Microsoft to pay out 'billions' as part of Nokia deal

IDG News Service - Nokia on Sunday hinted that Microsoft essentially won a bidding war against Google to supply software to the world’s largest handset maker and that the software giant agreed to pay “billions” of dollars for the privilege.

It also suggested that the first Nokia phones running Windows Phone software are likely to come out this year.

Nokia’s new CEO, Stephen Elop, who formerly worked for Microsoft, sought to answer some of the questions that have come up most frequently since the company announced last week that Nokia would start using the Windows Phone mobile operating system. He spoke in Barcelona on Sunday, the night before the Mobile World Congress starts.

He referred to a slide that Nokia displayed last week that showed marketing resources and other investments flowing from Microsoft to Nokia as part of the deal. While speculation has had that number in the millions or tens of millions of dollars, the figure is actually much higher than that, he said. “In fact the value transferred to Nokia is measured in B's not M's,” he said.

He did not clarify further; for example, he didn't say over what period of time the investment will be made.

The company offered an additional hint about when the first Nokia devices running Windows Phone software will appear. Jo Harlow, senior vice president of marketing for Nokia, said that she is under pressure to deliver such devices this year. She displayed a photograph of a prototype of what the first phone may look like.

Elop sought to dispel rumors that he was essentially sent by Microsoft to take the helm at Nokia in order to make this kind of deal. “I am not a Trojan horse,” he said. The entire management team and board of Nokia were engaged throughout the decision process, and they were in agreement with the decision to go with Windows Phone, he said.

Nokia was “pursued” by both Google and Microsoft, which each saw “significant value” in a decision by Nokia to use their software, he said.

Google may have stood to benefit more, if it had won a deal to supply Android for Nokia phones.

“If you combine the current market share of Android with the market share that Nokia could deliver to Android over the next couple of years, it’s a very large number. One could believe the mobile industry thereafter would be some form of duopoly,” Elop said. The market would be essentially split between Android and Apple, he said.

Nokia went with Microsoft because it creates a very different dynamic in the market, he said. “We have created a three-horse race,” he said, repeating a comment that indicates he discounts the impact of Research In Motion's BlackBerry platform.

Nokia reiterated that it plans to continue to support developers who are building apps for Nokia's Symbian operating system, since there is a very large base of existing Symbian phones and more will be coming. It hopes to execute a smooth transition between Symbian and Windows Phone.

Also, Nokia plans to contribute some of its development of the Ovi store as part of the partnership. Nokia has partnerships with more than 100 operators so that end users can pay for purchases in the Ovi store on their wireless bills. That capability will put Windows Phone and Nokia ahead of both Apple and Android.

In addition, Elop said that there could be multiple stores, such as the Ovi store and Microsoft’s Marketplace, and that the Ovi store would offer all the apps available in the Windows store.

Nancy Gohring covers mobile phones and cloud computing for the IDG News Service. Follow Nancy on Twitter at @idgnancy. Her e-mail address is Nancy_Gohring@idg.com.