According to news coming in from insiders, Nokia Ovi will receive more than $1 billion from Microsoft as a part of the Finnish company’s software deal with the software giants in order to develop and promote mobile phone handsets which will run on the Windows Phone 7 platform. One of the sources, who preferred to stay anonymous as no official contract has yet been signed, also claimed that the terms include Nokia paying Microsoft a premium for each copy of the Windows Phone 7 operating system that it uses in its handsets, and that these costs will be offset by the fact that Nokia has cut down on its own budget for software development and research after the deal.
The partnership, if it comes to good, will be a big help financially to both these companies and will also help them put forth some decent competition to the Apple and Google smartphone market which they are currently struggling against. However, initial signs haven’t been very promising for Nokia as their market shares dropped by more than 26% after the deal with Microsoft was announced which reflects people’s doubts with adopting the software giant’s mobile operating system which is as young as six months into the market with just a very few percentage points of market share.
It is now evident that Finland based Nokia need to effectively cut down on costs so that their margins of operation are kept from narrowing even further, as they have shrank to as low as 4.9% last year compared to a 19% a decade ago. A Helsinki based analyst named Sami Sarkamies says that this will need Nokia to cut down on its budget for development and research in devices by about one third of its allocation from the 3 billion euros that it was worth last year.