Microsoft is reportedly set to pay Nokia more than a billion dollars as part of the 'unprecedented' Nokia Microsoft alliance which will see Nokia adopt the Windows Phone OS on new Nokia smartphones.
A Bloomberg report cited "two people with knowledge of the terms" of the deal, saying that the payment is in order for Nokia to "promote and develop Windows-based handsets."
Nokia will, however, pay a fee for each copy of Windows Phone used on new handsets which will be offset against the $1 billion Microsoft is fronting to get Nokia on board. One of the Bloomberg sources pointed out that Nokia would itself reduce the firm's budget for software research and development following the adoption of the outsourced OS.
The Nokia Microsoft agreement reportedly lasts for more than five years as both firms hope that the combination of Nokia hardware and Microsoft software know-how will result in a platform competitive with the market leaders, Apple and Google.
Despite the fact some analysts had been calling on Nokia to enact just such a deal, Nokia's shares have since taken a battering and are down 26 per cent following the announcement.
An Ars Technica editorial said that the billion dollars price tag represented "an absolute bargain" for Microsoft in order to boost the position of Windows Phone 7 and stop Nokia going with Google's rival Android operating system.