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Hoping to add value to its handsets, Finnish mobile phone producer Nokia (NYSE:NOK) has agreed to pay Microsoft (NASDAQ:MSFT) $650 million for the rights to run the Windows mobile OS on its devices. The payment will be made over the remaining time of the agreement, rather than one lump sum, Bloomberg reported. The company did not release the duration of the agreement.
The relationship between Microsoft and Nokia goes back about two years, when the two originally collaborated to compete against Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android-based devices. Although Android free, Nokia opted to use Windows on its hardware, presumably to offer something more unique to the market. Despite steady declines in market share, the Lumia, Nokia’s flagship phone, showed growth in sales last quarter.
Although Nokia is paying Microsoft for licensing royalties, Microsoft is returning the favor, and paying Nokia for its help in bringing the Windows OS to the mobile market. Support payments from Microsoft will this year exceed royalty payments made to the software maker, Nokia said, although the company said in January that in the future, this could be reversed.
That would be good news for Microsoft, which was just ordered by the European Commission to pay $733 million in fines.
Shares of Nokia, which reported a seventh straight drop in quarterly revenue in January, advanced 2.6 percent in Helsinki. The stock has lost more than 80 percent since the iPhone and the Android software were introduced in 2007, Bloomberg said. Microsoft shares were up 0.21 percent at noon EST.
Investing Insights: Can Microsoft Keep Growing?
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