Microsoft had saved Nokia from possible oblivion last year, when the two joined hands for Windows Phone devices. As time went by, details were revealed about the financial structure of the partnership. Microsoft was paying Nokia around $250 million per quarter in “platform support payments”. In turn, Nokia was supposed to pay Microsoft a token amount for “software royalties”, but was far less than the money coming in. In a nutshell, there is more money coming in for Nokia than they were asked to give back. A charity? A loan? Well, it seems more like the latter.
Microsoft now wants to get the money back. At the time of reporting their last quarter figures, Nokia mentioned this as a curt footnote.
The text released by Nokia reads, “Over the life of the agreement the total amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitment payments. To date the amount of platform support payments received by Nokia has exceeded the amount of minimum royalty commitment payments to Microsoft. Thus for the remainder of the life of the agreement the total amount of the minimum software royalty commitment payments are expected to exceed the total amount of the platform support payments.”
To simply summarize, Microsoft saved Nokia from drowning. Nokia bet its future on Windows Phone. Now, Microsoft wants to get back the pile of cash it chucked Nokia’s way every quarter. And that would be more than what Nokia can expect to earn in an entire year, let alone within a quarter. To top it off, Microsoft might be working on a Windows Phone device of their own. And the likes of Samsung, Huawei, HTC, and LG will be fairly aggressive in 2013. All in all, this is what we call “a royal mess.”
Source: Nokia