Nokia will has received more money from Microsoft than it has paid for Windows Phone royalties, the company said today in a 20-F filing. Microsoft has been paying Nokia $250 million to support its tough transition from Symbian to Windows Phone as its one and only smartphone platform.
Nokia on the other hand still has to pay an undisclosed amount of money to license every device it sells that is running on Microsoft’s Windows Phone.
And while over the whole period of the agreement Nokia will have to pay more to Microsoft, in 2013, the balance sheet will be in its favor as the amount it receives as platform support from Microsoft will exceed the money Nokia pays for licenses.
Here is the Microsoft part of Nokia’s 20-F filing:
Our agreement with Microsoft includes platform support payments from Microsoft to us as well as software royalty payments from us to Microsoft. Under the terms of the agreement governing the platform support payments, the amount of each quarterly platform support payment is USD 250 million. We have a competitive software royalty structure, which includes annual minimum software royalty commitments that vary over the life of the agreement. Software royalty payments, with minimum commitments are paid quarterly. Over the life of the agreement, both the platform support payments and the minimum software royalty commitments are expected to measure in the billions of US dollars. 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. As of the end of 2012, the amount of platform support payments received by Nokia has exceeded the amount of minimum software royalty commitment payments made to Microsoft, thus the net cash flows have been in our favor. As a result, the remaining minimum software royalty commitment payments are expected to exceed the remaining platform support payments by a total of approximately EUR 0.5 billion over the remaining life of the agreement. However, in 2013 the amount of the platform support payments is expected to slightly exceed the total amount of the minimum software royalty commitment payments, thus the net cash flows are still expected to be slightly in our favor. In accordance with the terms of the agreement, the platform support payments and annual minimum software royalty commitment payments continue for a corresponding period of time. We have recognized a portion of the received platform support payments as a benefit to our Smart Devices cost of goods sold and the remainder as a liability as part of accrued expenses and other liabilities on our balance sheet.