Bloomberg News

Nokia to Pay Microsoft a Net $650 Million as Part of Pact

March 07, 2013

Nokia Oyj (NOK1V), the Finnish mobile-phone maker attempting a comeback with handsets running Microsoft Corp. software, expects to pay its partner about a net 500 million euros ($650 million) as part of the companies’ accord.

The sum will be paid over the remaining term of the agreement, Nokia said today in a statement, without disclosing the duration of the pact. Nokia, based in Espoo, Finland, also reiterated its long-term financial targets.

The company teamed up with Microsoft two years ago to challenge Apple Inc. (AAPL:US)’s iPhone and devices using Google Inc.’s Android operating system, choosing Windows over Android which Google gives away for free. The effort has yet to reverse declines in Nokia’s smartphone market share, though sales of the company’s flagship Lumia increased last quarter.

Nokia is paying Microsoft license fees for the Windows Phone software, while receiving payments from its partner for supporting its push into the wireless business. Support payments from Microsoft will still this year exceed royalty payments made to the software maker, Nokia said.

Shares of Nokia, which reported a seventh straight drop in quarterly revenue in January, closed 1.6 percent higher at 2.79 euros in Helsinki. The stock has lost more than 80 percent since the iPhone and the Android software were introduced in 2007.

Nokia said in January that future royalty payments to Microsoft will probably exceed support payments received, without disclosing the amount.

Targets Repeated

The company said today it keeps trying to boost its devices unit’s operating profit, excluding some items, to 10 percent of sales or more, while targeting faster revenue growth than the market as a whole. In the fourth quarter, that margin was 1.3 percent.

Nokia’s forecast compares with an average analyst projection for 2015 operating margin of 6.1 percent, Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki, said in a note.

Nokia also said Chief Executive Officer Stephen Elop’s compensation for 2012 declined to 4.33 million euros from 7.94 million euros a year earlier, as stock and option awards declined and he received no bonus.

To contact the reporter on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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