Microsoft's Windows Phone 7 Could Benefit Nokia: Analyst

Microsoft's Windows Phone 7 operating system could prove to have positive synergy with Nokia, should the latter adopt it. Rumors suggest Microsoft and Nokia are in talks.

Here's one from the Totally Unexpected Department: Microsoft and Nokia are apparently in discussions over porting Windows Phone 7 onto Nokia phones, according to an online report.

Russian blogger Eldar Murtazin, in an editorial published on Russian Website Mobile Review, suggested that Nokia and Microsoft initiated the talks a month ago. "They are talking about the creation of a new line of Windows Phone devices," according to Unwired View, paraphrasing Murtazin's piece, "which could be sold under Nokia brand, via Nokia distribution channels and have some typical Nokia features."

For its part, Nokia reportedly declined to comment on "rumors and speculation."

In the past, Nokia has denied any intention of adding to its smartphone ecosystem. "This stance was strongly reinforced by our management during Nokia World, and we have no plans to use other operating systems," company spokesperson Leo McKay told Bloomberg in September, the last time rumors emerged that Nokia would integrate Windows Phone 7 into its offerings.

If Nokia ever adopted Windows Phone 7, Microsoft would likely make the company hew to the same platform hardware requirements as other manufacturers, including the use of a 1GHz processor. The company's current operating systems include Series 40, Symbian and MeeGo; its newest flagship device, the N8, runs the Symbian 3 operating system.

But according one analyst, adopting Windows Phone 7 would hold advantages for Nokia. "The hardware competition is fierce, and companies like Samsung and LG have made enormous gains on the device side by being agnostic and opportunistic," Al Hilwa, an analyst with IDC, wrote in a Dec. 20 e-mail to eWEEK.

Nokia's quest to "leverage smartphone device economics," Hilwa suggested, will eventually mean "coming to terms with Android and Windows Phone 7." Nokia CEO Stephen Elop's history as an ex-Microsoft executive could give the latter an advantage if Nokia wants to choose an "agnostic and opportunistic" operating system.

"I would say that [Windows Phone 7] has much greater alignment with Nokia's intellectual property DNA than [does] Android," Hilwa added. "I believe an alignment between these two vendors is a win-win in the industry."

Microsoft already has a software partnership with Nokia extending back to August 2009, when the two companies announced that mobile versions of Microsoft Office would come preloaded on Nokia smartphones. At that time, Nokia also began work on optimizing Microsoft Exchange ActiveSync for its devices, allowing for more streamlined access to e-mail and personal information.

Even as Microsoft and Nokia collaborated on that front, a changeover in the companies' respective executive suites threatened to spin the relationship in unexpected ways: In September, Microsoft Business Division president Stephen Elop stepped down to take the CEO reins at Nokia.

"I am writing to let you know that Stephen Elop has been offered and has accepted the job as CEO of Nokia and will be leaving Microsoft," Microsoft CEO Steve Ballmer wrote in a Sept. 9 e-mail to company employees. "Stephen leaves in place a strong business and technical leadership team, including Chris Capossela, Kurt DelBene, Amy Hood and Kirill Tatarinov, all of whom will report to me in the interim."

Thus emerged a new question: Would Elop, in his new role, shepherd a deeper partnership between his new company and Microsoft, or leverage his knowledge of Redmond's inner workings to kick off an era of fiercer competition? Elop had been hired to drive a larger transformation within Nokia, which, despite its strong international reputation, had never managed to gain a substantial foothold in the U.S. smartphone market. Just as he stepped into the position, a September research note from IDC suggested that Nokia's share would continue to dip through 2014, even as the company maintained its position as the world's No. 1 smartphone platform.

"The time is right to accelerate the company's renewal; to bring in new executive leadership with different skills and strengths in order to drive the company's success," Jorma Ollila, chairperson of the Nokia board of directors, wrote in a Sept. 10 statement. "The Nokia Board believes that Stephen has the right industry experience and leadership skills to realize the full potential of Nokia."

Whether Elop decides to embrace his former company's operating system, though, remains to be seen. According to another analyst, any Windows Phone 7 adoption by Nokia would need a sound strategy underlying it.

"If this is the path, it could be beneficial to both companies," Rob Enderle, principal analyst of the Enderle Group, wrote in a Dec. 20 e-mail to eWEEK. "If it is yet another hedge in a massive bet that includes platforms from Nokia, Intel, and Microsoft, it will spread Nokia's resources too thin for them to execute well on any of the initiatives."

Nokia would have to cede a significant degree of control to Microsoft, a bridge that might prove too far for a company that historically has liked to keep a tight rein on its ecosystem. "Now if they could license an embedded version of Windows Phone 7 and create their own experience on top of that, it would be interesting, and their new CEO could likely cut that deal given his Microsoft pedigree," Enderle wrote. "But, in the end, Nokia needs to pick a path and properly resource it. . . ."