Nokia, Microsoft Announce Partnership, New Strategies

Nokia and Microsoft plan to form a "new global mobile ecosystem" that will include running Windows Phone 7 on Nokia smartphones.

Nokia and Microsoft officials hope that by combining forces, they can become significant players in a lucrative and highly competitive smartphone market in which each has struggled while rivals Google and Apple have flourished.

At a joint press conference in London Feb. 11, Nokia and Microsoft announced plans to form a strategic partnership that will include running Windows Phone 7 on Nokia mobile smartphones rather than Symbian or MeeGo, bringing together their respective strengths to create a new "global mobile ecosystem."

In addition, they plan to create what officials said are calling new service offerings.

Together, Nokia and Microsoft, Nokia CEO Stephen Elop said at the event, "have the opportunity to disrupt the current trajectory in the battle of ecosystems. We have a formidable plan to ensure our collective leadership in the smartphone market and in the ecosystem that surrounds it. Our long-term strategic alliance will build a global ecosystem that creates opportunities beyond anything that currently exists."

Microsoft's presence at the event - Microsoft CEO Steve Ballmer was on stage with Elop-came as a bit of a surprise, as it had been scheduled by Nokia, where Elop was slated to outline his intentions for turning around the company. Despite being - until just last quarter - the longtime, worldwide phone market share leader, Nokia has been steadily losing shares to Android-running phones as well as the Apple iPhone. Following a leaked internal memo by Elop - a former Microsoft executive-to Nokia employees Feb. 8 calling for a previously unthinkable change in behavior, many guessed that Nokia was finally ready to abandon Symbian, the flagging operating system that it has steadfastly stood behind, for an alternative. News stories in the days leading up to the announcement suggested that Nokia would choose Windows over Google's Android OS.

As part of the new partnership, Nokia will adopt Windows Phone as its principle smartphone operating system, contributing its hardware expertise and helping to bring the Microsoft OS to a larger range of price points, market segments and markets worldwide.Nokia's Ovi applications store will be folded into the Microsoft Marketplace, Nokia Maps will become a core part of Microsoft's mapping services, and Microsoft's Bing will power searches on Nokia handsets. Additionally, Microsoft development tools will be used to create applications for Nokia handsets, to help expand the new ecosystem's global reach.As of April 1, Nokia will also separate into two distinct business units: a Smart Devices unit and a Mobile Phones unit. The former will focus on smartphones, including Symbian smartphones (Symbian will become a "franchise platform, leveraging previous investments to harvest additional value," said in a statement), MeeGo computers and strategic business operations. The latter will focus on Nokia's "Web for the next billion" strategy, which seeks to deliver an affordable Internet experience to a billion users, primarily in developing markets.Given the core competencies of each, the pair insisted that they could move quickly to market."Ecosystems thrive when fueled by speed, innovation and scale," Microsoft's Ballmer said in a statement. "The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute."Nokia officials said in statements that they expect to see revenue growth in 2011 and beyond as the spike in smartphone sales continue, but added that this year and 2012 should be viewed as transition years as the partnership with Microsoft ramps up.Effective Feb. 11, Nokia also has a new leadership structure, still topped by Elop. Jo Harlow will run Nokia's Smart Devices category; Mary McDowell will lead the Mobile Phone unit; and its Markets division, responsible for selling products and executing compelling marketing campaigns, will be headed by Niklas Savander.This month Nokia also opened a new headquarters in California's Silicon Valley.While the pair certainly have some work to do, they're apparently confident that together they can stand up against Apple and Google.With Nokia and Microsoft's strengths combined, Elop said in the statement, they expect to deliver an ecosystem with "unrivaled global reach and scale." He added, "It's now a three-horse race."