Nokia's Windows Phone Deal Carries Risks, Phones in Two Years: Report

Nokia discusses its Windows Phone deal in a new document, including the inherent risks and the plan for Nokia-built Windows Phones to hit the market in two years.

Nokia's first Windows Phone 7 devices won't hit the market for another two years, and the company's partnership with Microsoft carries some wide-ranging and systemic risks.

That comes from Nokia's publicly released Form 20-F 2010 report, a massive tome submitted to the U.S. Securities and Exchange Commission and posted on Nokia's Website.

A good portion of the report's 275 pages are devoted to the wide-ranging partnership deal Microsoft and Nokia announced Feb. 11, which will make Windows Phone 7 the main software platform for Nokia's smartphones. Bound together, the two companies will attempt to challenge Apple's iPhone and the Google Android smartphones that control wide swaths of the market.

Under the terms of the agreement, according to the report, Nokia will apparently leverage its expertise in hardware and design to "help bring Windows Phone to a broader range of price points, market segments and geographies." In addition, the two companies will collaborate on both development and joint marketing initiatives.

"We expect the transition to Windows Phone as our primary smartphone platform to take about two years," the document continues. "While we transition to Windows Phone as our primary smartphone platform, we will continue to leverage our investment in Symbian for the benefit of Nokia, our customers and consumers, as well as developers."

If you extrapolate forward from the partnership's February announcement, that "about two years" time frame means that the first Nokia smartphones loaded with Windows Phone 7 will hit the market sometime in 2013. Previous reports had the first Nokia-Microsoft smartphones arriving sometime in 2012.

If Apple follows its yearly refresh cycle for the iPhone, then 2013 will see the release of the iPhone 7. And Google Android will almost certainly have evolved to a point far beyond its current state. Presumably, Windows Phone 7 will have also advanced during that period. Such a broad time horizon makes it difficult to conjecture about the ultimate look of a Nokia smartphone with Windows Phone 7, although some leaked early concepts suggest devices with iPhone- or Droid-style sleekness.

But the Nokia deal has offered Microsoft one possible early benefit: according to data from analytics firm Flurry, more developers began projects for Windows Phone 7 once rumors of a possible partnership began to filter onto the Web.

"This week, with the early speculation and subsequent announcement that Nokia and Microsoft would be partners, Flurry measured a 66 percent increase in Windows Phone 7 starts over last week," Peter Farago, Flurry's vice president of marketing, wrote in a Feb. 11 posting on his company's blog.

Microsoft continues to encourage mobile developers to create applications for the platform. It has already adjusted some of its developer policies, including a raised limit in the number of zero-fee certifications that can be performed for free applications, from five to 100. The company claims its Windows Phone 7 ecosystem has grown to 9,000 applications, with a base of 32,000 developers.

That comes along with news that the first major Windows Phone 7 update, with cut-and-paste and faster app-loading, will be delayed until the second half of March.

"After careful consultation with the team and our many partners, we've decided to briefly hold the March update in order to ensure the update process meets our standards and that of our customers," a Microsoft spokesperson wrote in a March 10 e-mail to eWEEK.

In February, Microsoft released a Windows Phone 7 update intended to smooth the way for future updates. Soon after that update began to push its way into the ecosystem, however, some users began complaining it stalled their smartphones. Microsoft temporarily suspended the update for Samsung smartphones, and evidently is taking precautions this time around to make sure everything goes as planned.

They're not the only ones concerned about Windows Phone 7's smooth running. For Nokia, the partnership also carries some substantial risks.

"If we fail to finalize our partnership with Microsoft or the benefits of that partnership do not materialize as expected, we will have limited our options and more competitive alternatives may not be available to us in a timely manner, if at all," reads one section of the report. "Our expected transition to the Windows Phone platform may prove to be too long to compete in the smartphone market longer term."