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Nokia Says It Will Get 'Billions' From Microsoft

By NICK WINGFIELD

Nokia Corp. will receive "billions of dollars" in financial support from Microsoft Corp. over the early years of their partnership to help market and develop Nokia phones using Microsoft's Windows Phone operating system, according to Nokia Chief Executive Stephen Elop.

In an interview, Mr. Elop outlined the Microsoft payments and other benefits Nokia will receive as a result of the deal between the two companies, under which Nokia will adopt Windows Phone as its main smartphone operating system. Although Nokia will pay Microsoft an undisclosed royalty for licensing the Windows Phone software for Nokia handsets, Mr. Elop said Nokia will see "very substantial reductions" in operating expenses, including layoffs, because it will no longer need to spend as much to develop mobile software on its own.

The Finnish phone maker's shares fell sharply Friday after the deal was announced, in part because of a perception that Microsoft had won the upper hand in the deal. While Mr. Elop conceded Nokia has challenges in regaining lost ground in the mobile market, he said Nokia's still-commanding market share in the handset business gave it a strong bargaining position in talks with Microsoft as well as with Google Inc., maker of the Android mobile-phone operating system.

Mr. Elop said executives at both Microsoft and Google recognized that an alliance with Nokia could have a decisive impact on their mobile fortunes, and were willing to cut deals favorable to Nokia as a result.

"We're the swing factor," Mr. Elop said. "We can swing it to Android or swing the industry over to create a third ecosystem."

A Microsoft spokesman said the company won't comment on the financial terms of the deal. Mr. Elop talked by telephone from Barcelona shortly before a Nokia news conference at the Mobile World Congress in Barcelona.

Mr. Elop said the payments Microsoft agreed to make to Nokia as part of the deal will go toward ensuring the success of the Windows Phone devices Nokia makes, including marketing and research-and-development costs aimed at distinguishing Nokia phones from rivals. "Microsoft has placed a value on our decision to go in one direction and not another," he said.

He said Nokia will also be able to tap into new sources of advertising revenue through the Microsoft deal. Mr. Elop added that the pact will allow Microsoft to receive the benefits of Nokia's broad intellectual-property portfolio in the mobile market to strengthen Windows Phone, though he declined to describe the financial terms of that aspect of the agreement between the companies.

Mr. Elop said an acquisition of Nokia by Microsoft was "never on the table" in the discussions between the two companies. He said substantial portions of Nokia's business include lower-end handsets aimed at emerging markets, such as India, on which Microsoft is less-focused.



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