Microsoft To Compensate Nokia Handsomely to Promote Windows Based Handsets

Microsoft is moving forward with a controversial deal that has the tech giant paying Nokia better than $1 billion in return for the handset maker to produce a wide array of Windows-based smartphones.

According to Bloomberg News, reports of Microsoft’s $1 billion “payoff” come from anonymous sources that are said to be close to the deal.

The yet-to-be finalized agreement, which will span at least five years, dictates that Nokia “will pay Microsoft a fee for each copy of Windows used in its phones, costs that will be offset as Nokia curtails its own budget for software research and development.”

The deal is a win-win for both Microsoft and Nokia, says Colin Gillis, an analyst at BGC Partners in New York. Collins tells Bloomberg News that the partnership ā€œgives Microsoft scale and allows Nokia to rip out costs. Microsoft is getting the platform boost that comes from acquiring a Nokia for about a billion dollars.ā€

For Microsoft, in particular, the arrangement stands to bolster the company’s floundering Windows mobile phone operating system. For months, Microsoft CEO Steve Ballmer has faced harsh criticisms from investors regarding the less-than-stellar sales of the tech-giant’s mobile software. In the wake of Google and Apple gaining an even larger smartphone market share already this year, Microsoft stock has fallen 7.8% in 2011 so far.