Microsoft, Nokia Partnership To Trouble RIM, Windows Mobile

Microsoft and Nokia's newly announced partnership, which will see a mobile version of Microsoft Office loaded onto Nokia smartphones, has a definite short-term target: Research In Motion's BlackBerry.

An eWeek interview with Microsoft and Nokia spokespeople following the companies’ joint press conference on Aug. 12 suggested that the mobile Microsoft Office applications would likely come pre-loaded onto Nokia’s Eseries smartphones, allowing out-of-box functionality.  

Although BlackBerry and other rival smartphone devices offer a degree of functionality with regard to viewing and editing Office documents, Microsoft spokesperson Kirk Debique argued that the Office applications being pushed through Nokia will be "rounded out with a set of collaboration experiences, such as SharePoint," and that a "more traditional Office experience" would be offered.

Ilari Nurmi, a spokesperson for Nokia, also suggested during the meeting that RIM and BlackBerry were very much in the crosshairs.

"The Blackberry and RIM has a strong role currently in the business mobility market," Nurmi said. "This is basically something that Nokia believes, that by its partnership with Microsoft, providing the leading-edge experience, we are very much targeting RIM."

Analysts suggest that the alliance holds substantial benefits for both companies, but might also suggest that Microsoft is less sure that its own mobile operating system, Windows Mobile, will be able to sustain – despite Microsoft’s repeated assurances during the Aug. 12 rollout that it was still fully backing Mobile, and indeed intended to keep competing against Nokia’s Symbian OS.

The agreement "is great news for enterprises," Nick Jones, an analyst with Gartner, wrote in a blog posting after the announcement. "Clients with Nokia devices and Microsoft back ends will have more choice. [This] is also good for the Microsoft divisions responsible for Office, Exchange, Sharepoint, OCS and SystemCenter."

The alliance would also make the Eseries more appealing to enterprises already utilizing Microsoft technology, Jones thought, and help Nokia compete more effectively with RIM.

"This is also good for Microsoft on a deeper level, because there’s another game being played here," Jones added. "Over the next couple of years Microsoft will face greater competition in mobile email, unified communications and collaboration from a wide range of organizations" including Google and RIM. "Being available on Symbian – the dominant smartphone platform – will help Microsoft fight these competitors."

Some players suffer within the context of this new paradigm, however, particularly HTC, which had supported Windows Mobile. The alliance with Nokia also suggests that Microsoft could be experiencing an internal crisis of faith with its mobile OS.

"I see this as a tacit admission from Microsoft that WinMo [Windows Mobile] hasn’t made the grade," Jones wrote. "Imagine you’re Steve Ballmer, and in two years' time WinMo was still fourth in smartphone market share. How much longer do you keep throwing money at it?"

Spokespeople from both Microsoft and Nokia declined to discuss any structuring in the deal that would allow the Office partnership to operate without pressure from competition among the companies' other mobile divisions. However, the answer to that question may lie with the politics of survival: with regard to the smartphone market, both companies could use a boost.

According to an August report from research firm Gartner, smartphone sales increased by 27 percent during the second quarter of 2009, even as overall sales of mobile phones dropped by 6.1 percent. That translated into good news for Apple and its new iPhone 3GS, but the data was decidedly more mixed for Nokia.   

Worldwide sales figures for smartphones give Nokia a 45 percent share of the market, versus Research In Motion with an 18.7 percent market-share and Apple with 13.3 percent. However, its high-end N97 smartphone sold only 500,000 units in the channel since its June launch date, a figure considered soft by industry analysts when compared to the Apple iPhone 3GS, which sold one million units during its first weekend of release.

In addition, Symbian’s share of the smart-phone OS market has dropped from 57 percent in second-quarter 2008 to 51 percent in the same period of 2009, even as the market for both RIM and Apple expanded year-over-year. Microsoft’s share of that market dropped to 9 percent.

In a research note, Gartner Research Director Carolina Milanesi noted that Nokia would need something of a revamp in order to solidify its share in the various markets:

"The right high-end product and an increased focus on services and content are vital for Nokia if it wants to both revamp its brand and please investors with a more promising outlook in ASPs and margins."