Microsoft to Give Nokia $1 Billion Allowance for Windows Phones?

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Whoa, Microsoft! Big spender! Nice cufflinks! And are you wearing $108 sweatpants from Lululemon? You must be doing really well for yourself.

The backstory: Microsoft and Nokia struck a partnership wherein Microsoft’s new Windows Phone 7 mobile platform will be used on Nokia’s many, many smartphone handsets that ship all over the world. Microsoft gets its operating system out there en masse, Nokia gets a decent operating system for its smartphones.

Bloomberg is reporting that Microsoft may be using its many, many monies to help Nokia get Windows Phone 7 onto its many, many handsets. The grand total may be more than a billion dollars, “according to two people with knowledge of the terms,” says Bloomberg.

In other words, nothing’s official yet.

Apparently Nokia will need to pay Microsoft a licensing fee for each handset that runs Windows Phone 7, and this billion-dollar gift is supposedly meant to grease the wheels as Nokia ramps up production.

It’s kind of like if your parents offer to sell you the family car but you make payments to them using your allowance. However, unlike how you ultimately stiff your parents after they forget that you’re supposed to be making car payments to them, Microsoft may come out ahead on this deal.

Says Bloomberg:

“Nokia’s royalty payments will help Redmond, Washington- based Microsoft make a profit on the accord even after the payments to Nokia, one person said. Some of the payment to Nokia would be made before the company starts selling the phones, meaning Microsoft bears some upfront cost in the partnership.”

The deal will apparently be good “for more than five years.” This may just be tricky accounting on Microsoft’s part—”Look, we’re making tons of money on Windows Phone 7 licensing deals!”—or it may simply be a nice cash infusion for Nokia, which is expected to reduce R&D and staff count this year “to keep operating margins from narrowing further,” according to Bloomberg.

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