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Nokia on the hook for €500M in payments to Microsoft

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Nokia said it expects to pay around a net of €500 million to Microsoft as part of a multi-year agreement to cover software licence fees. However, Nokia will receive slightly more in Windows Phone "platform support" payments this year from Microsoft than it pays to the software giant in royalties, though Nokia will begin paying Microsoft more than it receives starting in 2014.

Nokia Lumia 720

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The €500 million will be paid to Microsoft over the remaining term of the agreement, Nokia said today in a statement, without disclosing the duration of the contract.

The company selected Microsoft's Windows Phone platform two years ago to mount a challenge to Apple's iPhone and devices using Google's Android, albeit that Google provides Android for free.

While Windows Phone is slowly gaining wider consumer acceptance, its efforts to climb into a distant third place has recently intensified after the relaunch of BlackBerry 10 this year,

"Given Microsoft's muted support at recent major events such as CES and MWC, Nokia needs every penny of support it can get to fund its development programme and the promotion of the Windows Phone platform," CCS Insight analyst Ben Wood told the Financial Times.

Nokia also said it is pushing to boost the operating profit of its devices unit, excluding some items, to 10 per cent of sales, while targeting faster revenue growth than the market as a whole. In the fourth quarter, that margin was 1.3 per cent, according to Bloomberg.

Commenting on Nokia's latest statement, Nordea Bank analyst Sami Sarkamies said in a note that this latest forecast compares with an average analyst operating margin projection for 2015 of 6.1 per cent.

Separately, Nokia dislcosed that CEO Stephen Elop's annual comepnsation packaage for 12 fell by 45 per cent comapred to 2011. The ex-Microsoft executive received €4.33 million in cash and stock options last year, down from €7.94 million in 2011. Elop did not get a cash performance bonus for 2012 after receiving almost €1 million in cash performance bonuses in the first two years he was at Nokia.

For more:
- see this Nokia release
- see this Bloomberg article
- see this FT article (sub. req.)
- see this Reuters article

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