Rumor: MS paying $1 billion to Nokia in phone deal

When the news broke that Nokia will be creating a new smartphone based on Windows Phone 7 instead its own first-party Symbian OS, many questioned why it would go with WP7 and not the more popular Android.

Now, it looks like it’s because Microsoft made an offer Nokia couldn’t refuse.

According to a Bloomberg report, Microsoft gave Nokia one billion reasons to create a Windows Phone 7-powered smartphone. The publication cites two people “with knowledge of the terms” as revealing that Microsoft proposed a $1 billion offer to the once reigning mobile phone powerhouse.

Nokia has a lot of pull in the world of phones. On a global scale, it has the largest market share. However, that’s only because it is the only provider of cell phones in dozens of under-developed countries around the world, where it sells millions of handsets.

When it comes to smartphones, though, Nokia has faltered. In the US, it’s hard to find a single Nokia device in any mobile electronics retailer, and even in Europe, where the company is based, interest is waning.

Part of the problem is that unlike most mobile manufacturers, Nokia makes its own operating system. Other companies like Samsung and Motorola have the flexibility of choosing what mobile platform to use on each device they make, but because Nokia is also in the software business, it hasn’t had any of that flexibility.

It looks like the company is finally caving, though, as recently appointed CEO Stephen Elop said he wants to consider offering other platforms on Nokia handsets. As soon as he made those comments, everyone assumed that meant we’d see a Nokia Android phone. Then, it was revealed the company was interested in Windows Phone 7 instead, which seemed like a highly odd choice to save a sinking ship.

Even though the $1 billion deal would put Nokia in a higher foothold for a while, it’s almost like using a Band-Aid to cure someone who’s been decapitated. Shares of Nokia have fallen 26% since the Microsoft partnership was first announced. Investors think Nokia dropped the ball, big time, by not going with Android.