Nokia: Transition to Windows Phone to take about two years

Nokia filed on March 11 a form 20-F with the Securities and Exchange Commission which mentions a number of new tidbits about Nokia's smartphone-centric partnership with Microsoft.
Written by Mary Jo Foley, Senior Contributing Editor

Nokia filed on March 11 a form 20-F with the Securities and Exchange Commission which mentions a number of new tidbits about Nokia's smartphone-centric partnership with Microsoft.

(A PDF of the nearly 200-page document is available on the Web, which I found via a link on GigaOm's JKontheRun blog. If you have problems viewing that one, here's another download link.)

The document confirms that Microsoft and Nokia still haven't finalized the deal, announced in February, noting the pair has "entered into a non­binding term sheet... (while) the planned partnership with Microsoft remains subject to negotiation and execution of definitive agreements by the parties."

There's been some debate as to whether Nokia will be fielding its first Windows Phone 7 devices in 2011 or 2012. (The last "official" word from Nokia was the company expected to start selling WP7 phones in volume in 2012.)

But in the 20-F, Nokia officials said the transition to Windows Phone as its "primary smartphone platform" will take "about two years."

Nokia officials called out 2011 and 2012 as "transition years," during which the company will be moving to Windows Phone and investing "in building a new ecosystem with Microsoft." The ultimate goal is to try to "retain and transition the installed base of approximately 200 million Symbian owners to Nokia Windows Phone smartphones over time," the document said.

What else does the 20-F reveal? I did a quick search through the document and found 101 mentions of "Microsoft." Here are some of the particulars I noticed when looking through those references:

* Unsurprisingly, Office will be part of the new deal: "Another area of focus is our strategic alliance with Microsoft to design and market a suite of productivity applications for Nokia smartphones. During 2010, we made available Microsoft Communicator Mobile, the first application developed as part of this alliance, which gives employees direct access to corporate instant messaging through their Nokia smartphone."

* There will be a distinct division of labor with Microsoft: "Nokia would bring assets such as its brand, hardware, productization, global reach, application store, operator billing support, maps and location­-based assets to the partnership. Microsoft would bring their next generation smartphone platform with Windows Phone, as well as search, broader advertising, ecommerce, gaming and productivity assets such as Bing, AdCenter, Xbox Live and Office."

* Silverlight is the primary developer story for the coming Windows Phones, but Java's not totally going away: "For developers, we believe that we can create new and highly attractive monetization opportunities. By leveraging Microsoft’s proven developer tools and support, based on Silverlight, with our operator billing, merchandising and global application store, we intend to offer new monetization mechanisms for developers while providing access to Nokia’s global scale. We will continue to promote Qt as the sole application development framework for our Symbian smartphone platform on which we expect to sell approximately 150 million more devices in the years to come. For our Series 40­based feature phones, we will continue to support a Java-­based development environment."

* Nokia will have a new operational and reporting structure in place, as of April 1, 2011: "(W)e will have a new operational structure, which features two distinct business units in Devices & Services business: Smart Devices and Mobile Phones. They will focus on our key business areas: smartphones and mass­market mobile phones. Each unit will have profit ­and ­loss responsibility and end ­to ­end accountability for the full consumer experience, including produc development, product management and product marketing."

* Even if he wasn't a Trojan Horse, CEO Stephen Elop made out OK after leaving Microsoft for Nokia: In the filing, Nokia said that it paid Elop a salary of 280,303 euro with a bonus of 440,137 euro. Including stock options and awards, Elop made 6.66 million euro. That's the equivalent to $9.17 million. Elop was paid 2.3 million euros as a one-time payment for lost income for leaving Microsoft and another 3 million euro in October 2011 for fees he was obligated to repay Microsoft, legal expenses related to his move to Nokia and monies for medical/dental, a driver and a mobile phone.

To me, Microsoft's partnership with Nokia is a lot like the one it finally forged with Yahoo. While neither deal resulted in Microsoft purchasing another company, Microsoft is getting most, if not all, of the things it wanted from each of those partners without actually having to pay for the entire company and then integrate it into the mothership.

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