Nokia made some waves last week when CEO Stephen Elop announced that Nokia was on a burning platform and that they needed to innovate, renovate and move forward in a new direction. The one he picked was side by side with Microsoft, now it seems that the reason he made this choice wasn’t purely because they had a better setup than Android or Apple; it’s that they received over $1 billion.
However, while this initially sounds like a poor deal for Microsoft, they will likely get a lot of this money back in the next few years, as Nokia will be forced to give the software giant a royalty fee for each phone that they sell that includes Microsoft’s latest operating system, Windows Phone 7.
“This gives Microsoft scale and allows Nokia to rip out costs,” said Colin Gillis, an analyst at BGC Partners in New York, who recommends buying Microsoft shares. “Microsoft is getting the platform boost.”
Elop was asked if such a large fee was worth it and would they in-fact have been better off going with Android? Apparently not, as he believes the company would have been lost with all the “me too” devices that the Google OS is likely to pick up in the coming year.
“A decision to go with Windows Phone creates a very different dynamic. Windows Phone is a challenger. It becomes a three-horse race,” said Elop according to Mobile Beat.
Here’s Nokia EVP Dr. Kai Oistamo talking about the Nokia/Microsoft deal: