Nokia on Thursday disclosed that it will receive more royalty payments from Microsoft than it pays to the software giant this year.
Nokia's today filed its annual report on Form 20-F for 2012 with the US Securities and Exchange Commission. In the report, along with the company's longer-term financial targets, the company provided additional information in relation to its agreement with Microsoft.
Nokia, which adopted Microsoft's Windows Phone software for its mobile phones in 2011, said its payments to Microsoft will exceed what it receives from the U.S. company by around $650.00 million over the remainder of the agreement to pay each other royalties.
Nokia's agreement with Microsoft includes platform support payments from Microsoft to the Finish company as well as software royalty payments from Nokia 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. The two companies 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.
Nokia says that over the life of the agreement, the total amount of the platform support payments will 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 Nokia's 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," Nokia says.
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 Nokia's favor.