The suggestion that Microsoft might have dangled a fiscal carrot on a stick in front of Nokia to tempt it to support Windows Phone 7 is not new.

The $1 billion figure placed on securing its backing most certainly is.

That's the length BusinessWeek claims Microsoft is prepared to go to to ensure Windows Phone 7 begins making an impression on its rivals over the course of the coming years.

Microsoft money

Citing two people with "knowledge of the terms" currently being tossed back and forth between the two parties, the likely final agreement will see Nokia pay Microsoft a fee for each copy of WP7 employed on its handsets.

 

However, such costs will be offset by a scaling down of the Finnish firm's research and development budget as a result of supporting WP7, coupled with a $1 billion payment made by its new partner.

"This gives Microsoft scale and allows Nokia to rip out costs," BGC Parnters analysis Colin Gillis told BusinessWeek.

"Microsoft is getting the platform boost that comes from acquiring a Nokia for about a billion dollars."

Devil in the detail

It's believed part of the cash will also come in the form of Microsoft paying Nokia to use its patent portfolio, including Navteq's mapping products for geolocation services and selling location-based advertising.

However, sources claim that, even after paying out to Nokia – the $1 billion set to be stretched out over several payments, with the first injection coming before Nokia even produces its first handset - the license fee taken by Microsoft will help it make a profit on WP7 far earlier than some had expected.

[source: BusinessWeek]