Nokia Microsoft Windows Phone contract is for 5 years, in force until 2016. But is it WP exclusive?
Now that the deal to sell Nokia to Microsoft fell through, the Finnish company may start considering its other options. And one of them is to add Android smartphones to their product line-up.
But Android option has one problem- the contract Nokia signed with Microsoft, when it went Windows Phone exclusive. And which includes $250 million a quarter platform support payments from Microsoft, of which Nokia already received $1.5 billion.
Helsingin Sanomat, Finnish biggest daily paper, reports that the duration of Nokia Microsoft contract is 5 years. Which means that Nokia’s options to separate itself from Windows Phone until 2016, are limited.
The big question is – how limited?
It is obvious that there should be some penalties there, if Nokia decides to abandon Windows Phone and switch to another smartphone OS. And we already know that Nokia has made some firm commitments on the amount of Windows Phone licenses it must buy from Microsoft each year, no matter what.
But is there some exclusivity clause there, that would prevent Nokia to adopt some other, third party smartphone OS, if it continues to promote Windows Phone too, and meets its minimum royalty requirements?
It is possible, but I really doubt that such clause exists.
The decision to go Windows Phone exclusive was purely Nokia’s, and was based on high hopes for Microsoft OS, way too inflated confidence in its own sales force, and belief in ability to “flip a switch” and cram almost anything down consumer throats. After all, back then, even disastrous phones like Nokia N97 sold in millions. And, in late 2010, they managed to ship 5 million smartphones running the flawed Symbian^3 OS, within 3 months after its launch. Why not repeat the feat with Windows Phone next year?
But adding the clause that forbids Nokia to even try some other, third party OS? That would be going too far, and may have some serious issues with European competition/anti-trust authorities.
Remember how things looked from both companies perspective back when they negotiated this deal? They didn’t go into partnership, expecting it to fail. In early 2011 Nokia was still the biggest smartphone and mobile phone maker in the world. And expected to remain the biggest OEM indefinitely, gradually phasing out Symbian smartphones and replacing them with Windows Phones.
Now imagine if the optimistic assumptions of Nokia Microsoft partnership came to pass. Nokia would still be the biggest smartphone maker in the world, Windows Phone would already be bigger than iOS, probably even Android. All Nokia competitors – Google, Apple, Samsung – will be looking for any opening to take Nokia down a notch.
European anti-trust authorities already hate Microsoft from the days of Wintel PC monopoly. Heck, they have opened an anti-trust investigation against Microsoft for Internet Explorer/Windows bundling less than a year ago. And threaten them with $7 billion fine, long after Windows PC monopoly stopped to matter.
Imagine what would have happened if, by now, Windows Phone would have got as big as Microsoft and Nokia expected it to be? And then, after some competitor complaints, EU opened an investigation into their partnership agreement and found a clause in the contract preventing Nokia to even try anything else, but Windows Phone? Whatever Stephen Elop and Steve Ballmer have agreed in private, would they risk putting that in writing?
Somehow, I don’t think so.
Furthermore – in 2011 Nokia was negotiating with Microsoft from the position of strength. Stephen Elop had many options – Android, continuing Meego devlopment, doing WP and Meego, or WP and Android simultaneously, etc;. Microsoft didn’t have any. The first version of its mobile OS has already failed, and if Nokia went Android, Windows Phone would have been as good as dead. So going Windows Phone exclusive for a while , getting several billion for it and exclusive rights to influence Windows Phone codebase, should have seemed as a good option for Nokia. Indefinitely (well, until 2016, but that’s the same thing in smartphone years) and exclusively tying itself to Microsoft, certainly wasn’t. Even if you subscribe to “Elop is a trojan horse” conspiracy theories, Nokia’s board wouldn’t have approved such exclusivity clause.
So even if Nokia Microsoft marriage contract is in force until 2016, as far as penalties for sleeping with other people go, from Nokia POV they are most likely limited to those minimum WP royalty commitments.
And now that they are not selling themselves to Microsoft outright, there’s nothing, except of Nokia’s own limited resources and dwindling cash reserves, to prevent them from making an Android phone.