Nokia Still Owes $650 Million More Of Microsoft Over Their Long-Term Windows Phone Partnership

Posted on Mar 7 2013 - 9:12pm by Editorial Staff

Nokia-Microsoft

Earlier last year I reported that Nokia and Microsoft $250 million partnership begin to show off its colors with moving the ball in Nokia’s favor after choosing Microsoft’s Windows Phone platform over Symbian. But, today after a whole long year has been passed, Nokia revealed that it owes $650 million more to Microsoft in their long-term platform deal.

The Finnish mobile company today filed its 20-F financial report for the last fiscal year and in which it discussed out Nokia stands to gain this year in its Microsoft partnership developing Lumia devices, saying the company has to pay out more to Microsoft.

Nokia shares that the remaining minimum software royalty commitment payments are expected by a total of approximately €500 million (about $650 million) over the remaining life of the agreement. The company also shared that the quarterly platform payments total $250 million through this year Microsoft will be the net gainer.

Part from the 20-F financial report filing:

Our agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft. Under the terms of the agreement governing the platform support payments, the amount of each quarterly platform support payment is USD 250 million. We have a competitive software royalty structure, which includes annual minimum software royalty commitments that vary over the life of the agreement. Software royalty payments, with minimum commitments are paid quarterly. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US dollars. Over the life of the agreement the total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitment payments. As of the end of 2012, the amount of platform support payments received by Nokia has exceeded the amount of minimum software royalty commitment payments made to Microsoft, thus the net cash flows have been in our favor. As a result, the remaining minimum software royalty commitment payments are expected to exceed the remaining platform support payments by a total of approximately EUR 0.5 billion over the remaining life of the agreement. However, in 2013 the amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitment payments, thus the net cash flows are still expected to be slightly in our favor. In accordance with the terms of the agreement, the platform support payments and annual minimum software royalty commitment payments continue for a corresponding period of time. We have recognized a portion of the received platform support payments as a benefit to our Smart Devices cost of goods sold and the remainder as a liability as part of accrued expenses and other liabilities on our balance sheet.

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