Nokia Discloses Details of Arrangement With Microsoft: Who’s Paying Whom?
Nokia’s decision to go all-in with Windows Phone put it in an interesting place, forming a relationship with a company controlling a platform unlike anything we see elsewhere in the smartphone world. We’ve known that Microsoft has provided Nokia special treatment as a result of this affiliation, but if you were wondering just how much money has been switching hands between these two companies, and who’s been ending up on top, Nokia has spelled a few things out in a recent financial disclosure release.
Microsoft has on ongoing obligation to Nokia to provide a support payment of $250M a quarter, or a cool billion dollars a year. Nokia, in turn, pays Microsoft royalties to cover the use of its Windows Phone software on the company’s smartphones. Here things get a little complicated, and rather than some easy per-device figure, the companies have a structured arrangement, with certain minimum payment requirements and royalties that vary over time.
So far, Nokia has gotten more money from Microsoft than it’s paid back in royalties. This trend should continue through 2013, with Nokia continuing to take in more than it returns, but those days will not last forever. By the time these agreements run their courses, Nokia will end up somewhere around $650M behind Microsoft. Of course, this only reflects income directly from Microsoft, and we can’t forget that Nokia itself is taking in money on each Lumia sold.