Nokia pins revival on Microsoft's Windows Phone 7, sidelines MeeGo

Beleaguered handset manufacturer Nokia (NYSE:NOK) confirmed plans to radically shake up its strategic direction, inking a broad strategic partnership with Microsoft (NASDAQ:MSFT) that positions the software maker's fledgling Windows Phone 7 mobile operating system as Nokia's primary smartphone platform. Per terms of the deal, Nokia and Microsoft plan to forge a worldwide mobile ecosystem integrating their respective assets--for example, Microsoft's Bing engine will power search across Nokia devices and services, and Microsoft assets like Bing and AdCenter will incorporate the Nokia Maps solution. In addition, Nokia's Ovi Store will merge with Microsoft's Windows Phone Marketplace--Microsoft software tools will enable developers to build apps that run across Nokia devices, leveraging the handset maker's global scale. Nokia also boasts extensive global operator billing partnerships, enabling developers to reach consumers in regions where credit card usage is negligible.

With Nokia's migration to Windows Phone, the Symbian operating system moves to franchise platform status--Nokia said it will continue leveraging previous investments and will strive to retain and transition its installed base of 200 million Symbian device owners worldwide. The company expects to sell roughly 150 million additional Symbian units in the years ahead. MeeGo--the platform combining Nokia's former Maemo and Intel's former Moblin efforts, slated to power all of Nokia's future high-end device--now becomes an open-source project, with an emphasis on longer-term market exploration of new devices, platforms and user experiences. Nokia maintains it will ship a MeeGo-related product later this year.

The Nokia/Microsoft partnership follows days after technology analysis firm Canalys reported that shipments of smartphones running Google's (NASDAQ:GOOG) Android mobile operating system surpassed Symbian device shipments for the first time in the fourth quarter of 2010. Android shipments topped 33.3 million in Q4, translating to a 32.9 percent share of the global smartphone market, Canalys reports--a year earlier, Android shipments represented just 8.7 percent of the worldwide market, a 615.1 percent leap. Symbian shipments grew from 23.9 million in Q4 2009 to 31 million in the most recent quarter--however, its worldwide market share plummeted from 44.4 percent to 30.6 percent during that time. Windows Phone also stumbled, with its market share falling from 7.2 percent to 3.1 percent as smartphone shipments decreased from 3.9 million in Q4 2009 to 3.1 million a year later.

"This is a 'make-or-break' strategy by both Microsoft and Nokia," writes Informa Telecoms & Media principal analyst David McQueen in a note published Friday morning. "There is no question that this partnership will provide scale for Microsoft which has been struggling in the mobile world since the beginning and will offer more competition, which will benefit operators (more options in terms of platforms). However, this may not be the best move for Nokia and it is questionable how ‘open' Microsoft will be to work with. Even if Nokia fear Google's dominance, an open platform like Android would allow much more possibilities to Nokia."

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