Sources have told Bloomberg that Microsoft Corp. will pay Nokia over $1 billion to develop Windows-based mobile devices as part of their previously announced strategic partnership.
“This gives Microsoft scale and allows Nokia to rip out costs,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying Microsoft shares. “Microsoft is getting the platform boost that comes from acquiring a Nokia for about a billion dollars.”
These people say the agreement will run for more than five years and would see Nokia paying Microsoft a fee for each copy of Windows used on its phones. Nokia would offset these costs by shrinking its own software research and development budget.
Microsoft stock has dropped 7.8 percent this year while Nokia stock dropped 26 percent since they announced this partnership with Microsoft. Both are struggling in the mobile market against fierce competition from Android and Apple.
This deal should give Nokia some breathing room in their budget as they lose dominance in the mobile market. Sources say Microsoft opted for this $1 billion deal to prevent Nokia from going Android. Nokia may also use the newer Windows Phone OS as a way to stand out from the competition.
via Businessweek