Microsoft's deal with Nokia was the talk of the town at this year's Mobile World Congress, but that deal apparently didn't come cheap. Microsoft will pay Nokia more than $1 billion to have Nokia produce Windows Phone 7-based devices, according to Bloomberg.
Nokia will pay Microsoft for the copies of Windows it places on its phones, but Bloomberg said the cost of that endeavor could be offset by cuts that Nokia has made to its software R&D efforts.
The $1 billion price tag is part of a campaign waged by Microsoft to keep Nokia from choosing Google's Android OS, Bloomberg said.
During his MWC keynote, Microsoft chief Steve Ballmer took a page from Steve Jobs's playbook to ding Google for what he considers to be a fragmented platform.
Microsoft is working to ensure that innovation "doesn't lead to the kind of fragmentation for developers that other platforms in the phone arena are currently experiencing," Ballmer said. "That's going to allow more phone designs at a broader range of price points and more exciting new apps and experiences for Windows Phone customers than we can imagine."
During a separate keynote at the same conference, Google chief Eric Schmidt said he was disappointed that Nokia went with Microsoft.
"We would've loved if they would have chosen Android; they chose the other guys," Schmidt said. "I think we were pretty straightforward. We would like them to adopt Android at some point in the future; that offer remains open."
"We think Android was a good choice for Nokia, and we're sorry they made a different choice," he continued.
Ballmer, meanwhile, said the Nokia investment will help Windows Phone 7 expand in 2011.
"Nokia's involvement ... will drive volume, will create new innovation and products, and will accelerate the adoption of the Windows Phone platform," Ballmer said during his keynote. "The additional energy that comes with this announcement ... will help consumers get new hardware, fresh choices, and amazing services."
Windows Phone 7 has had a bit of a slow start, shipping about 2 million of the devices by late January. Microsoft execs confirmed as much during a January earnings call, saying it was "encouraged" by Windows Phone 7 sales, but "we realize we still have a lot of work ahead of us and we remain focused and committed to the long-term success of Windows Phone 7."
A recent minor update for the platform, meanwhile, also recently hit a snafu, prompting Microsoft to temporarily shut down the update for Samsung phones. That update recently resumed; a larger update that will bring services like cut and paste is expected soon.
On the Nokia end, CEO Stephen Elop said at MWC that Microsoft will help Nokia address the challenges of re-entering the U.S. market. "The world is shifting from a battle of devices to a war of eco-systems," Elop said.
For more, see PCMag's interview with Elop at the conference and the slideshow below.