Nokia and Microsoft sign definitive agreement for Windows Phone and more

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The agreement for Nokia and Microsoft to work together to create a "new global mobile ecosystem", announced in February, has now been signed. Nokia and Microsoft will now continue to work together, each bringing their own strengths to the table, seeking to combine their complimentary assets. The two companies say that significant process has been made on the engineering of new products and that outreach to developers has already begun.

Stephen Elop, President and CEO of Nokia Corporation, said:

"At the highest level, we have entered into a win-win partnership. It is the complementary nature of our assets, and the overall competitiveness of that combined offering, that is the foundation of our relationship."

 Steve Ballmer, CEO of Microsoft, said:

"Our agreement is good for the industry. Together, Nokia and Microsoft will innovate with greater speed, and provide enhanced opportunities for consumers and our partners to share in the success of our ecosystem."

The agreement covers the areas previously talked about on February 11th, with no huge surprises, but the announcement today includes some additional details and clarifications. 

The relationship is structured into four broad areas:

  • The use by Nokia, of the Windows Phone platform in its smartphone portfolio of devices. Microsoft will receive a royalty from Nokia for the Windows Phone platform, which will start when the first Nokia Windows Phone ships. The royalty payments reflect "the large volumes Nokia expects to ship" and considerations for the "engineering work to which both companies are committed". This would suggest the royalty payment are significantly lower than for other Windows Phone licensees (currently set at around $15 per device). This will allow Nokia to "significantly reduce operating expenses".
  • A combination of complementary assets, which will result in:
    • Nokia will deliver mapping, navigation and location based services to the Windows Phone ecosystem. 
    • Nokia will provide expertise on hardware design and language support helping to drive development of the Windows Phone platform. For example, this is likely to include helping to specify, design and build a lower cost chassis specification for Windows Phone.
    • Microsoft will provide Bing search services across the Nokia device portfolio (e.g. Bing search on Series 40 devices). Microsoft will also contribute strength in productivity (Office and Exchange), advertising (adCenter), gaming (XBox) and other services.
    • The combination of Nokia's navigation and location assets with Microsoft's advertising and search services is expected to open up completely new forms of advertising revenue for both companies.
    • Nokia and Microsoft will collaborate in joint developer activities to support the creation of new local and global applications. This will include free Windows Phone developer registration for all Nokia developers.
    • A new Nokia-branded global application store, built on Windows Marketplace infrastructure. Developers will be able to submit applications through a single portal for Windows Phone, Symbian and Series 40 devices.
    • The use of Nokia's expertise in operating billing, which means participants in the Windows Phone ecosystem will be able to take advantage of Nokia's billing agreements with 112 operators in 36 markets.
  • Nokia will receive payments measured "in billions of dollars" ro reflect the "unique nature of Nokia's agreement with Microsoft and the contributions that Nokia is providing". This payment is likely the price Nokia asked of Microsoft to make the transition and will help offset the losses and costs associated with the transition.
  • A mechanism has been put in place for exchanging rights for intellectual property (patents and other items). As a result, Nokia will receive substantial payments. This reflects the fact that Nokia has a substantially stronger intellectual property position in the mobile space compared to Microsoft.

In the press release Nokia indicates that work on Windows Phone products is well under way and that it has started porting key application and services.

With hundreds of personnel already engaged on joint engineering efforts, the companies are collaborating on a portfolio of new Nokia devices. Nokia has also started porting key applications and services to operate on Windows Phone and joint outreach has begun to third party application developers.

Volume shipments of Windows Phone-powered Nokia devices are still expected to commence in 2012, although many people will be wondering if a limited run of Windows Phone devices may appear during Q4. “…There is tremendous pressure to bring it ahead into this year,” says Nokia’s Waldemar Sakalus.

The full Nokia / Microsoft press release can be found here.