Microsoft Corp. will pay Nokia Oyj more than $1 billion to promote and develop Windows-based handsets as part of their smartphone software agreement, according to two people with knowledge of the terms.

Nokia will pay Microsoft a fee for each copy of Windows used in its phones, costs that will be offset as Nokia curtails its own budget for software research and development, said one of the people, who declined to be identified because the final contract hasn’t yet been signed. The agreement runs for more than five years, the people said.

If it succeeds, the partnership may benefit both sides financially while helping stave off a smartphone threat from Apple Inc. and Google Inc. Nokia shares have dropped 26 percent since the accord was unveiled Feb. 11, reflecting doubts about the move to adopt Microsoft’s operating system, which is less than six months old and has just a few percentage points of market share.

More: http://www.businessweek.com/news/2011-03-07/microsoft-is-said-to-pay-nokia-more-than-1-billion-in-deal.html