Microsoft to pay Nokia $1 billion to go with WP7: reports

According to a Bloomberg report, Microsoft will end up paying Nokia more than $1 billion to promote and develop Windows Phone 7 handsets. The report cited two unnamed sources said to be in the know of the terms of the agreement, who said Nokia's commitment to the platform is also long-term with the agreement supposed to last more than five years.

The sources further confirmed that the final contract between the two companies had still not been signed and for this reason many of the details and specifics were still not public.

Microsoft would be paying some money up-front, and giving Nokia a share of advertising revenue and it would also be paying for its use of Nokia's Navteq mapping services. To even this out, Nokia would in turn pay Microsoft for each license it ships.

According to analysts first off, this sounds like a lot of money, it is like Microsoft is paying a billion dollars just to stop Nokia going in for Android, with a deal, under which, Nokia would continue to sell Symbian handsets, and even the MeeGo-powered N950 which will ship later this year.

They add the deal will not see Microsoft make immediate gains either, as Nokia's Windows Phone 7 handsets are not expected to ship in volume-or possibly even at all-until 2012.

Over the short term, the deal certainly seems to be tilted towards Nokia as the company would still be spending money on Symbian development. It expects to ship  150 million of the handsets in the next couple of years - but would be able to scale back this expenditure, with its operating system development costs increasingly pushed to Microsoft. With this and the cash infusion, the company would come to enjoy instant savings analysts point out.