Microsoft to pay Nokia $1b in WP7 partnership

Microsoft is set to pay Nokia around one billion dollars to promote and develop Microsoft's Windows Phone 7 operating system for its smartphones, a source told BusinessWeek. Nokia will pay Microsoft a licensing fee for using Windows Phone 7, but still much cheaper than Nokia continuing to work on its own mobile operating system.

The two companies announced a strategic partnership in Feburary, allowing Nokia to fully customise Windows Phone 7 for use on its cellular phones. Rumours of the deal began as soon as current Nokia CEO Stephen Elop left Microsoft in 2010 for the Finnish mobile company.

The source, who wishes to remained unidentified due to the contract not yet being signed, told BusinessWeek that the deal is set for the next five years. The move works out great for both companies as Nokia gets a solid operating system that it has been desparately needing, and Microsoft gets some of Nokia's massive market share.

The agreement comes in light of dominance that both companies are facing from Apple's iOS and Google's Android operating systems.

"In success, it is a very mutually beneficial deal economically for both companies," Microsoft Chief Financial Officer Peter Klein said at an investor conference last week.

Nokia is more than likely waiting on Microsoft to release "Mango", the next major release of Windows Phone 7, before it begins to release its line of Windows Phone 7 smartphones.