Microsoft Is Still Writing Checks to Nokia, but Things Will Switch Soon
As part of Microsoft’s deal with Nokia, both companies are paying each other billions over several years. However, the exchange is heavily uneven, with Nokia getting most of the cash early on and Microsoft getting more in the deal’s later years.
As we pointed out in January, Nokia has reached the point at which it owes Microsoft more in guaranteed minimum royalty payments than it is due in future “platform support payments” from Microsoft. Nokia has been getting $250 million per quarter from Microsoft since the deal took effect.
In a regulatory filing on Thursday, Nokia went into more detail on just where things stand.
Nokia noted that it now owes Microsoft more than 500 million more euros ($650.5 million) than it is due from Redmond. However, for the balance of 2013 it still expects to be getting a net payment from Microsoft.
Here’s the full text of what Nokia had to say on the matter:
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.