Friday, February 11, 2011

Microsoft and Nokia to Join Forces in Smartphone Market

ABI Research has commented on the fact that Nokia has announced this sweeping and profound change in its strategy. Accepting that the Symbian operating system cannot meet the needs of today’s smartphone consumer, Nokia has opted to throw in its lot with Microsoft and use the Windows Phone 7 operating system in future Nokia smartphones. In addition, the Nokia devices unit has been split into two business units that will address smartphones and low cost phones separately. I have heard rumblings about this partnership but thought it would take more time to pull it off with these two giants.

The sweeping changes made at Nokia will begin immediately and likely take two years to be completely digested as the two technology giants try to merge their mobile service ecosystems and product development roadmaps. ABI Research VP Kevin Burden states, “With Nokia taking over the Windows Phone 7 universe, the other OEMs who have initially supported Window Phone 7 may rethink their commitment, and eventually end support of Windows Phone 7 the way they did with Symbian, due to Nokia’s dominance and influence over the platform.”

The speed at which such a major decision was made speaks to the desperate situation Nokia CEO Stephen Elop perceived in Nokia’s device strategy. Senior Analyst Michael Morgan states “Elop’s decision to go with his old employer makes sense up front; however the decision to tie an incomplete operating system with an ailing handset design company is a very risky proposition.” Microsoft and Nokia need a strong partner to push their mobile efforts forward. While this alliance may not be optimal for either party, when fighting for survival it is always nice to have a partner.


  1. GSMA Mobile Business Briefing at Mobile World Congress reported that Nokia’s decision to opt for Microsoft’s Windows Phone 7 (WP7) platform as its primary smartphone OS, rather than Android, was prompted by a desire to avoid a “duopoly” in the mobile industry between Google/Nokia and Apple, CEO Stephen Elop told reporters at a press conference tonight in Barcelona on the eve of the GSMA Mobile World Congress.

    Elop said that the Finnish handset giant had been “suited” by both Google (Android) and Microsoft in the weeks leading up to last Friday’s announcement. “A decision to swing to Android would have tilted the mobile ecosystem in the direction of a duopoly, but we wanted to create a challenger,” he said.

    Elop noted that the new partnership will initially operate as a straightforward OEM deal, which will see Nokia pay Microsoft a fee to use its software. But he also talked up the significant “value transfer” in financial terms that would come Nokia’s way as a result of reduced operating expenses and new revenue streams such as access to Microsoft’s search and advertising capabilities. This financial contribution would be “in the billions not the millions,” Elop said.

  2. Those two big companies really had the good idea in joining forces about the smart phone market. The combine forces will be a big hit for the marketers.