Nokia to get more than it gives to Microsoft in 2013

Today Nokia released its financial Form 20-F to the United States Securities and Exchange Commission which outlines its long-term business targets and outlines their relationship with Microsoft. Amongst the dense financial lingo and obvious goals to grow their sales ahead of the market, while keeping costs down, came an interesting tidbit. In 2013, Nokia stands to receive more money from its partner Microsoft than it will pay out in royalties to them.

The relationship between the two giants is one of reciprocal payments and goes back to 2011. Like any manufacturer of Windows phones, Nokia pays a licensing fee to Microsoft to use their operating system. But unlike other companies, Nokia receives massive payments from Microsoft as part of their partnership to use certain Nokia functionality, such as mapping technology, and to help Nokia with advertising, their transition from Symbian and marketing.

The deal, which started in 2011, runs for five years. It has not always been, nor will it always be the case, but it appears that Nokia will make out ahead of its partner in the deal in 2013. Nokia states in the filing that the money it sends over to Microsoft in royalties will exceed what they get by about half a billion Euros by the end of the deal. But in a year where Lumia sales are strong and Windows Phone is making a big push, it could be useful to have that extra cash coming in.

The filing can be found in its entirety here.

Source: Nokia


Reader comments

Nokia to get more than it gives to Microsoft in 2013


Kind of, though they do not own even 1% of Nokia. 
Also WP has never made any profit for Nokia, while Nokia Siemens Network and Nokia's feature phones made 550 million euros on last quarter. 
Microsoft trusts Nokia on hardware for now. Though i do wish they developed the platform faster. 

No. Nokia made their profit and shipped volumes (70-80 million handsets a quarter) on non-Microsoft technologies and platforms. Lumia is a mere curiosity in the product portfolio, though a severy loss-making one.

Understanding where Nokia is now could be hard for people , i'll explain
Nokia now has a portfolio of devices that hit every price point world-wide.
This portfolio in stregthened by the Lumia range in numreous ways, meaning if Lumia's aren't there, Ashas won't sell well , because high end phones are a mark of a good brand.
the WP8 Lumia range is special in a way that is its the only range that competes with the IOS product range (sans the ipads)
It has the 920 which is the swiss knife of WP8. (low light/OIS/Wcharging/HD+screen/fast processor)
It has the 820 which is the low fat version of 920 (fast processor/Wcharging echangable shells/removable batteries/3d printed shells)
It has the newly born 720 a magistic mid range device that has (low light/1.9 aperture/carlziess/slim/huge batteries/4.3"screen)Wcharging through clip ons
It has the 620 , a great full featured almost entry level device (FFC/NFC/colorful and waterproof Exchangeable shells, great processor)
It has the 520 , the best entry smartphone ever , (slim, Wcharging exchanglbe covers, 5mp camera)
Yet all of those manage to have all the lenses in common , they have all the exclusive Nokia apps in common too, they have a consistent experience (IOS) while having hardware and econmical variations.(Android) while their WP8 advantages in skydrive/syncing with win8/people hub compete with (Blackberries.)
When you say curiosity you're out of your damn mind.

So... Basically this means that their sales in 2013 won't be as big as they estimated on 2012, because earlier statement was that in 2013 they will pay a little more to MS than receive? Not sure if this can be read like that...

No, I don't believe that it read like that at all. Nokia functionality has now spread to other OEM devices (like everyone having Nokia Drive+) so they are getting more in return then they pay for the royalties they pay for their devices.

That may well be a logical reason as well. Because, if their smartphone sales won't rise, they won't reach the long term 10% profitability which they just reiterated...

No, not really.
Thinking the core markets of Android and all, there was tens of millions people waiting for Nokia to make Android phone. You see some of Nokia's old competitors like SE/Sony and LG that used to sell 15-20 times less smartphones than Nokia. 
problem with Nokia on Android would have been that Nokia is a big company that has parts like Navteq that costed it 7.2 billion euros back in 2007. Google would have never let Nokia to integrate Navteq data and maps to its Android phones. 

I see companies like LG and SE/Sony struggling on Android in the shadow of Samsung and perhaps HTC. Fact of the matter is, at the time Nokia was in a bad position, going with Android would have pretty much sealed their fate. It is an oversatuarted segment with many OEMS to compete with. Also, Android OEM's are constantly under attack by lawsuits, and most of them now pay Microsoft for the use of Android.  Given all of this, Nokia chose the option that had someone paying them. Google would never have agreed to the same deal Microsoft gave Nokia.

There were talks with Google too but they wouldn't let them be involved in the android development and the navteq thing didn't made google too happy either. it was all in this article complete with details about the microsoft deal and nokia transition in that period
But still if they had gott on with android sometime in 2010/2011 they would have definetely be the top dog in the android world. But they had to act before samsung started they grow,cause back then samsung was a glorified featurephone maker who was beaten by sony and nokia. This decision however would have resulted however in nokia being just another android oem with a big baggace called navteq that was pretty mucy unusable.
By going with microsoft they now have their own mapping service used with windows/bing, windows phone. They have a say in the development of the os, and all of this with zero costs of development comparable to their own in-house os,meego.
It is an embarassing position for lg and sony however. they were getting their asses kicked in the symbian days from nokia,and they are getting the same treatment now from samsung

It's incredible that Nokia pulled this off without MS owning any part of them. Half a billion in one year.

Though MS also needed somebody as big as Nokia. It's good to remember that just before last quarter Nokia was still selling more Symbian phones than whole WP ecosystem. That's over 2 years after Nokia said Symbian was dead officially. Just 2 years ago Nokia was selling over 20 million Symbian phones per quarter.
Lumias have yet to make any profit for Nokia at any time (NSN and Nokia feature phones made the 550 million profit on last quarter). Microsoft is essentially paying Nokia for Navteq integration and Nokia sticking with Windows Phone.

Hm, I don't think WP will every reach the commercial succses that Symbian enjoyed, and therefore, I don't think ti will ever be as profitable for Nokia as the old platform.
Nokia is keeping the WP strategy afloat.. so far, so good.. I guess.

Nokia exclusives must come because of this money... by being the premier channel partner they invest to promote and build the platform.  Which is ultimately mutually beneficial to Microsoft and all WP partners.

no. the platform payments and the licensing fees cancel themselves out during the life of the agreement(untill 2016) with nokia even paying more to microsoft. so all the money nokia puts in r&d, developer conferences and app exclusives come from their own pocket

I hope no one really expects to see a "Surface Phone" with Nokia doing this well and Microsoft investing revenue into the Nokia research. If you want a Surface Phone, look no further than the Lumia 1K.

Surface Pro is in the works, but it will not be released unless WP does not gain the adoption rates that MS wants to see. It will by used like the Surface RT/Pro, as a device to spur interest and give OEM's something to go off of. The Surface devices are not meant to be flagship devices to dominate the market.

What could spur more interest than Nokia's Lumia range and their constant updates and support? Microsoft would have to go some to produce something better, if they do kudos but I dont see that happening.

A Surface phone would certainly spur more interest than Lumia if it's positioned as a Nexus type device. If MS could double publish apps in both a MS store and the Nokia Collection, along with the device being network unlocked and getting updates first before Nokia? Then make it 4.5" or 4.7" 1080p and put the Snapdragon S4 Pro in it? I'd buy 2 right now.

such a device and strategy was needed by ms in the tablet world,and even there it didn't payed off cause most oems who wanted to release rt devices,gave up on the idea pretty quickly.
as for the phones part, they already have 3 top oems doing their best work with wp,both in design and quality of the devices and features. ms doesn't have anything to contribute here. a nice design and that's it. plus they already said the 8x is the signature device( termn that they use with windows when an oem doesn't install bloatware on the machine and has a pure windows experience) with the pure wp experience,nothing modified,no extra features. there really isn't any need for a surface phone

I think the biggest advantage to releasing a Surface Phone would be to grab more spotlight for Windows Phone in general.  I feel like a lot of my friends would still not know about Windows 8 if it were not for the high profile Surface launch.  Now Nokia obviously brings a lot of attention to WP, especially in places like Europe.  But MS releasing a high profile Surface phone could double that attention and maybe go a long ways toward improving the US marketshare in particular.

Exactly, in the US it's Samsung and Apple and that's pretty much it. Nokia is a big name here but it's mindshare has fallen so far due to the mid-late 2000's not being so kind to them that it's going to take a while to get them to be a top name here again. If MS does a high-profile Surface phone with the latest and greatest specs, you'd have US Today, NY Times, CNN and all other regular media jumping on the story like the Surface tablets. Even Oprah gave it shine!

Well, given the fact that without Nokia, Windows Phone would be a massive fail, I think it's more than fair.

Nokia is worth every penny MS hives them. Without Nokia this fight would be hopeless. HTC and Samsung are simply not invested or interested.

I agree. I wish Samsung would jump in with both feet too, not like they have a whole lot to lose. They make great hardware for the most part, and I thoroughly enjoyed my Focus.

That's not fair to Samsung & HTC at all. If HTC was getting more money from MS than they were paying out to MS, I'd bet they be just as heavily invested as Nokia is.

I don't think so.  Their attention is split. 
Samsung obviously couln't care less about WP at this point, no matter what MS would pay them.
HTC just doesn't have the software skill, marketing talent, and mapping data and expertise that Nokia brings to the table.  Not to mention the brand recognition that Nokia carries (at least in countries other than the US).
So maybe you're right that they would be invested, but I don't think that investment would bring anything close to the value of what Nokia brings.

The body of the article contradicts the title, and is internally contradictory. If "the money it [i.e., Nokia] sends over to Microsoft in royalties will exceed what they get by about half a billion Euros" then Nokia is a net loser.
So which is it?

Read the article again. By the time the deal ends at the end of five years, Nokia will have paid half a billion euros more than it receives in return. The article however is talking about 2013 and that Nokia expects this year to receive more from MSFT than it pays them in royalties

Ok, thanks, I stand corrected. The reason for my confusion is that this article gives no indication of how much more Nokia gets in 2013 than gives. 1 euro? 100 million euros? more? less? This article cites several figures, but none dealing with its stated subject. The only "figure" I've seen quoted is "slightly more."
This is a little too vague to rate as news.

An people attack my comment the other day saying Microsoft don't help Nokia over other manufacturers and this is a cause of why others are cautiously approaching Windows Phone.

Microsoft should encourage all manufacturer's this way

Nokia was the one who asked for the payments because they had the navteq service ready to be put to work and they bet the whole company on windows phone. see here -> http://www.businessweek.com/magazine/content/11_24/b4232056703101.htm
They are the only ones who did that. Htc and Samsung aren't doing any of this so they don't deserve this level of support. Let's be honest, the only reason why Samsung and Htc are releasing wp devices is to keep the bridges with Microsoft intact in case something happens with android. It's like a safety net for when things go worng. Beyond that they have no interest in helping windows phone gain marketshare,when they make big bucks already with android.
And nobody is cautiously aproaching windows phone. From all the initial launch partners, only samsung and htc remained with a couple of generic devices released a year with a minimum amount of support. And this happened before Nokia got on board with windowsphone. In fact the reason why some asian oems are ginving wp more attention now is because nokia worked so hard to make wp viable.
When Htc and Samsung will want to bet the whole company on wp and will have something ov value to contribute,beyond just making devices, i think microsoft will be more than happy to put some money on the table

I think what MS needs to do (if they don't already) is profit share a little with the Windows Phone Store.  they take a 70/30 split like Apple, hopefully they have a way to allow manufacturers and carriers to continue to monetize the customer after the sale, like Apple.
Making that a 70/20/5/5 where MS gets 20%, carrier 5% and manufacturer gets 5% of the revenue from each marketplace sale made with their device or over their network could go a long way toward getting more companies on Microsoft's side.
Hopefully they already do something like this.

I like it.  Microsoft should offer the carriers a 10% cut of store purchases... give them an incentive to sell WP

You're forgetting Microsoft is getting something in return. Nokia made their map software available to all wp oems. Also Nokia does a lot more to promote wp than any other oem. They are 100% invested in WP and bring their best hardware to WP. Samsung and HTC bring their best hardware to android and later port them to wp, usually when the hardware is starting to show it's age.

Topleya...What value or innovation does HTC pr Samsung offer? Nokia has IP (that ALL oems have to pay to use), and they have a valuable service (Navteq) that is licensed by companies other than Microsoft. Microsoft SHOULD pay Nokia - Nokia has much more to offer than all of the other oems combined.

This is what is Killing W8. Nokia uses Microsoft's money to get exclusives. Other OEM's don't get paid like Nokia to support the OS. From a economic stand point that's why HTC, Samsung, LG and etc. Don't push W8. Nokia gets paid to and other OEM's have to gamble on a new OS with out of pocket money. W8 will never thrive until the playing field is equal. Until then W8 is just a tax write off for Microsoft.

No they don't push wp simply because they do not have to. It's not their main focus....it's good to have your stuff spread out and dabbling and exploring your options which is what samsung, lg an htc are doing but their main focus will be android. WIndows phone is essentially a hobby basically to them,.

I think it could be argued that the WP platform would be in serious trouble without Nokia so I don't think that logic works out.  I believe that nearly all of the growth that WP has experienced is due to Nokia's push.

i'm sorry but with that is actually htc and samsung contribute?why should they get money? what do they have to offer? right now i only see 2 devices per year from samsung and htc.nokia now has 5 devices with 3 variants and more devices to be launched. not to mention their own apps that they give to the other oems(drive,maps),constant updated,real flagships with high end features,not 1 year old android clones,and organize developer conferences and programs.
you may have jumped directly to the cooments and didn't read the article,but the platform payment and the licensing feeds cancel eacother out with nokia even ending up paying more to microsoft in the long run. how about this,next you need to complain,direct that to htc and samsung.ask them why they only release a couple of devices with abysimal support and nothing else

I read the article. Not sure how long you've had a windows 7/8 phone. Microsoft was doing fine before Nokia. Do you own a Nokia phone? Your comment sounds a tad biased. Try to look at it from a executive point a view. If you have a product that you're trying to sell. The market is only 4%. Your competition is getting paid (Nokia) and you have to pay a license fee. As a executive could you honestly invest heavily in that? Or would you invest in Android where they have about 70% market share. I'm not downing Nokia. Business wise they're cleaning house. They're basically eating cake and ice cream. I'd love to be Nokia's CEO. On the flip side there's no way I'd invest in W8 with such a low market share and unequal playing field if i was another OEM. So back to my original post . Great for Nokia, EPIC FAIL for W8

What has HTC and Samsung contributed to MS? Last I checked, they, along with Motorola kept Windows Mobile alive MUCH longer than anyone expected. HTC was basically MS's manufacturing arm until MS decided to change directions with WP7 (along with the royalties) at the same time Android is made available and is pretty much free at the time.

With the royalties that Sammy & HTC pay MS for Android AND WP while not having anywhere near the financial support that Nokia has, I'd concentrate on selling more Android devices too since that OS is "free".

The ZDNet article didn't really give a timeframe.  It definitely didn't focus on 2013 specifically.  That is where the confusion was...  I do not like the title of the of the WPC article, while it may be factual.

"Nokia states in the filing that the money it sends over to Microsoft in royalties will exceed what they get by about half a billion Euros by the end of the deal."
Is this contradictory?

no. at the end of the 5 years agreement nokia would have actually payed microsoft 500 million euros.bassically microsoft is making a profit from the nokia deal,while nokia doesn't have a put resources in developing a platform and all that comes with it all by itself.they had tens of thousand of engineers working for symbian back in the day plus all the other costs so this way all the hardwork is on microsoft,they only work on wp when is needed

This pretty much strikes at the heart of the argument that HTC & Samsung are not as "interested & invested" in the WP OS. Of course MS will make more money from Nokia than Nokia will from MS over the long haul (that's just how business is done) but if HTC or Samsung were able to get paid more by MS than they were paying out, we'd definitely see way more investment from those guys.

As others have mentioned a dozen times, MS isn't just gifting those payments to NOK. MS is paying for a whole host of products and services, which both HTC and Samsung would either be unwilling or unable to provide. The world wide mapping data alone is worth billions. Prior to Nokia joining in, Bing maps were a complete joke everywhere but in the U.S. There is no reason for MS to offer HTC or Samsung anything, until they too have something to to bring to the table.

80% of which would consist of Nokia made hardware. Now, would Nokia be an independent company by then... no one can tell you.

Microsoft are doing fine, but their WP project would be pretty much doomed if it wasn't for Nokia. What people miss the most is that if Nokia is not making WP device, they will be making something else, and whatever that is... its going to be more competition for WP.

Also, don't forget that it was indeed Nokia who kept Windows Mobile at bay in the late 90s early 00s, and they invested billions in making sure that stayed that way. Here is a pretty good article about it: