Ina Fried

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Exclusive: Microsoft’s Lees and Nokia’s Oistamo Talk About Their Just-Signed Contract

Microsoft and Nokia are announcing today that the two companies have signed a definitive contract, fully committing each other to the partnership announced back in February.

The new pact, which stretches over hundreds of pages, details the financial commitments as well as delineating which company is responsible for which technical components as Nokia looks to make Windows Phone its “primary smartphone operating system.” The signed deal is being announced just as Nokia is set to report its most recent quarterly earnings and chat with investors and financial analysts.

In an exclusive joint interview late Wednesday night, Microsoft phone unit President Andy Lees and Nokia Executive Vice President Kai Oistamo talked about the contract and the technical work that has already taken place, as well as the work that remains ahead–including convincing the legions of Nokia developers not to jump ship as the company makes its huge leap from Symbian to Windows Phone.

Both executives stressed that things are ahead of schedule and that considerable progress has been made since the February announcement in London.

“We’ve gotten to where we have gotten to faster than we thought,” Lees said. “Now we know who is exactly writing each piece of code.”

To get to this point, there have been lots of flights back and forth from Finland to Redmond, as well as countless conference calls, e-mails and meetings as the collaboration has expanded from a small group of people talking about a deal to a larger team hammering out the details, and a vast effort at both companies to actually get started on the joint work needed to put all those terms and conditions into action.

The pace of progress is critical for both Microsoft and Nokia. Microsoft, of course, is still playing catch-up after essentially starting over with Windows Phone 7. The company is hard at work on a new version of the Windows Phone operating system, code-named Mango, due out later this year. That software aims to close key gaps with Android and Apple’s iOS, adding features like improved browsing and better multitasking while also giving software makers greater access to the phone’s hardware, allowing better applications for gaming and augmented reality.

Microsoft has said it is confident it can have the software on new phones and available as an upgrade for existing models this year, despite glitches with its first couple of software updates.

Nokia, meanwhile, wants to make this awkward transition time as short as it can, and also reduce the amount of time between committing to Windows Phone as its primary smartphone operating system and actually having products to sell.

Getting the contract signed was a milestone, but Oistamo said he is even more pleased with the technical work that has taken place in the past 60 days–including getting the first Nokia hardware running Microsoft’s operating system.

“A contract is just a contract,” he said during the joint interview with Lees. “The real thing is about creating something jointly together.”

Already, throughout the halls of Nokia offices worldwide, workers can be seen sporting Windows Phones alongside their existing Nokia devices. And some of them have working prototypes of Nokia hardware running early test versions of the next Windows Phone software.

Nokia has even posted some teaser concept photos on its Web site.

“The products are not done yet,” Oistamo said. “But you can already see the signs. Everything that we talked conceptually with you in London is actually coming into real fruition.”

Although the contract largely formalizes the same structure envisioned when the two companies announced the partnership in February, Oistamo said there have been some minor changes, as well as more details on how the partnership will extend beyond phones.

Microsoft, for example, plans to adopt Nokia’s mapping technology broadly beyond its phone business, while Nokia will use Microsoft’s Bing search engine on even non-Windows Phones.

As for the financials, Lees and Oistamo didn’t have much new to say, but reiterated Nokia CEO Stephen Elop’s assertion that the deal calls for billions of dollars to flow back and forth over the next few years.

Although Nokia doesn’t expect significant volumes of Windows Phone shipments until next year–and indeed will be making Symbian phones for some time to come–Elop has said that he wants the first Nokia device with Windows Phone on the market this year. And, while not offering any new details, Oistamo confirmed that those expectations haven’t changed.

“The preference and the ambition has definitely not changed, the sooner the better,” Oistamo said.

Doing so, though, means that the first Nokia smartphones running Microsoft’s software may not have as much distinctiveness as the company hopes to add over time.

“We are jumping into a moving train,” Oistamo said. “You can do more when you have a little bit more time.”

That said, even the first Nokia products running Windows Phone “are going to be very distinctly Nokia.”

Over time, Nokia hopes to bring a lot of its capabilities to both help Windows Phone as a platform and to make its Windows Phones stand out from the pack. Lees cited mapping as an area where Nokia will help the platform as a whole and imaging as an area where Nokia will try to differentiate itself from LG, Samsung, HTC and other phone makers developing Windows Phones. Even there, though, Microsoft had to do some work, noting that currently Windows Phone doesn’t give Nokia or any other hardware maker the access needed to truly stand out.

“Our platform is not fully optimized for that,” Lees said. “We need to make changes.”

Microsoft, for its part, is happy to have a partner as big as Nokia as it looks to better compete with Google and Apple in the smartphone battle. Lees noted that Nokia’s carrier billing relationships will mean that the company can sell apps even to those that don’t have a credit card, while its mapping prowess will make the phones more powerful in more countries.

“In the case of mapping, Nokia has far and away the largest global footprint,” Lees said. “Our mapping just got better everywhere around the world.”

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