Microsoft to reportedly pay over $1bn for Nokia Phone 7 deal

Maybe Stephen Elop got good value after all

Microsoft will pay Nokia over $1bn in development and promotional funds to seal the Windows Phone 7 deal, a report suggests.

A source close to the negotiations told Bloomberg that Microsoft will pay the funds primarily to support Windows Phone 7 development, as well as to promote new handsets in the US and elsewhere.

In return, Nokia will buy Windows Phone 7 licences for its handsets and save money by cutting software research and development.

"This gives Microsoft scale and allows Nokia to rip out costs," said Colin Gillis, an analyst at BGC Partners in New York.

"Microsoft is getting the platform boost that comes from acquiring a Nokia for about $1bn."

According to the report, the deal was partly to entice Nokia away from Google's Android operating system, and will also allow Microsoft to demonstrate increasing sales of its Windows Phone 7 platform.

Microsoft will also get access to Nokia's Navteq mapping software, and is working on a location-based advertising system which will involve a revenue split between the two companies.

Nokia announced today that it is selling the non-mobile licensing side of the Qt developer tools platform to Finnish firm Digia.