Microsoft, Nokia Deal Could Stumble on Timing

Microsoft and Nokia need to speed the transition of Windows Phone 7 onto the latter's smartphones in order for their deal to succeed, according to analysts.

The agreement between Microsoft and Nokia to port Windows Phone 7 onto the latter's smartphone devices will almost certainly change the mobile landscape in coming years. But if the two behemoths are to succeed in their plan to combat Apple and Google, they may need to execute their strategy with startup-style rapidity.

And at least one analyst feels Microsoft's cash-as opposed to any benefits of the Windows Phone 7 platform-may have persuaded Nokia to take the leap down a potentially dangerous path.

"If Nokia wanted to leave mobile operating system development to another company, IHS thinks Google Inc. and its Android software would have been a better choice," Jonathan Cassell, an analyst with HIS iSuppli, wrote in a Feb. 14 research note. "Nokia could have reaped many of the benefits it expects with the Microsoft relationship from either Google or Microsoft. But clearly, the unspecified billions in Microsoft cash payments were an important motivating factor in entering into the deal."

In the meantime, he added, Nokia will have to suffer through several quarters with no new products entering the marketplace.

"With the Microsoft deal unlikely to yield any products for nearly one year, Nokia will have no choice except to remain awkwardly reliant on the Symbian and MeeGo platforms in 2011," he wrote. "This will have a further negative impact on the Nokia's already-eroding position in smartphones."

Concept images of a Nokia-build Windows Phone 7 are floating around Websites such as Winrumors. Sleek and thin, the devices' designs seem tailor-made to counter high-end rivals such as the iPhone. The potential release date for such devices, though, remains an open question.

Nokia's agreement with Microsoft could help the latter penetrate the international markets where the former maintains a strong presence. However, Nokia's placement as dead-last among top mobile OEMs, according to the latest data from research firm comScore, suggests the deal's effect on the U.S. market could be somewhat more negligible.

Meanwhile, it remains too soon to tell whether Windows Phone 7 is living up to Microsoft's expectations for a new-and-improved smartphone franchise. Company executives claim that Windows Phone 7 is selling at a rate comparable to other first-generation smartphone platforms, but the exact number of devices reaching consumers' hands remains unclear. At the end of January, Microsoft confirmed that some 2 million Windows Phone 7 units had been sold by manufacturers to retailers.