Nokia: Windows Phone 7 Will Anchor Its Smartphones

Never say never.

That might be one of the main takeaways from Friday's announcement that ailing mobile phone giant Nokia will use Microsoft's Windows Phone 7 operating system on its future smartphones.

At a Nokia strategy briefing in London, the company's new CEO and president, Stephen Elop, stood side by side with his old boss, CEO of Microsoft (NASDAQ: MSFT), Steve Ballmer, to make the momentous announcement.

"Today, developers, operators and consumers want compelling mobile products, which include not only the device, but the software, services, applications and customer support that make a great experience," Elop said in a statement.

"Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivaled global reach and scale. It's now a three-horse race," Elop added.

Under the terms of the deal -- not all of which have been worked out yet -- Nokia will adopt Windows Phone 7 as its principal smartphone operating system. In return, Nokia will "help drive the future of Windows Phone," a joint statement by the two companies said.

Part of that would include Nokia contributing its expertise on hardware design, and on language support. Additionally, because of Nokia's global marketing and distribution infrastructure, as well as billing systems already in place, the agreement promises to make Windows Phones available at a broader number of "price points, market segments, and geographies."

"The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute," Ballmer said in a statement.

Microsoft has been struggling to make a credible entry into the smartphone market for several years, but although the aging Windows Mobile made some headway with enterprises for a while, the advent of Apple's (NASDAQ: AAPL) iPhone with features like multi-touch screen, apps environment, and Global Positioning System, pushed Microsoft into a limping also ran.

Then, last February, at the Mobile World Congress in Barcelona, Ballmer announced Windows Phone 7, Microsoft's challenger for the smartphone space.

The first Windows Phone 7 handsets began shipping in early November, and Microsoft later claimed manufacturers had sold 1.5 million phones running the software to operators and retailers in the first six weeks it was available.

However, that's a pittance compared to Windows Phone 7's leading competitors.

Meanwhile, Elop has had his hands full trying to redefine a new course for the Finnish phone giant which has also been losing market share to Apple's iPhone and to handsets running (NASDAQ: GOOG) Google's Android mobile OS, among others. Elop may be the executive who can do turn around the company's fortunes.

Until September when Nokia lured him away, Elop was president of Microsoft's Business Division, which among other products, has responsibility for Microsoft Office -- one of the software provider's best sellers.

That's part of the reason why a Nokia-Microsoft hookup was not unexpected.

In fact, the rumor pot has been bubbling with suggestions and innuendo since Elop joined Nokia, who was brought in to turn around the mobile phone and device maker, which has seen its market share in both smartphones and less-expensive feature phones eroded by more vital players like iPhone and Android, particularly as demand for smartphones has exploded in the last three years.

In the past week, more information on the deal leaked out and Elop's announcement of Friday's briefing primed the pump.

Placing Windows Phone 7 on Nokia smartphones is not the only concession that Microsoft got from Nokia.

For instance, Nokia will adopt Microsoft's Bing search technology and will integrate Nokia Maps into Microsoft's mapping services. In addition, Microsoft's adCenter will provide search advertising services on Nokia's devices and services, while it will also integrate Nokia's applications and content store into Microsoft's Marketplace, the companies said.

"Microsoft will continue to invest in the development of Windows Phone and cloud services so customers can do more with their phone, across their work and personal lives," said the two companies' joint statement.

The big question now is whether this marriage will work out.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals. Follow him on Twitter @stuartj1000.


Microsoft, Nokia, Windows Phone 7, Symbian