Nokia and Microsoft Partner To Dethrone Apple and Google In Smartphone Arms Race

Nokia's new CEO is shaking things up - recently announcing a strategic partnership with Microsoft to adopt Windows Phone OS for its smartphones moving forward.

Nokia’s new CEO is shaking things up – recently announcing a strategic partnership with Microsoft to adopt Windows Phone OS for its smartphones moving forward. More after the jump.

The partnering benefits are clear. Nokia will expand Windows Phone (and as a sideffect cut back on Symbian and MeeGo efforts) market share by adopting it for various priced phones and bring it to new market segments and geographies – as opposed to its current limitation to high-end devices. Search will be powered by Bing and Xbox Live integrations will also be present to drive a gaming community. In addition, the Ovi Appstore will become integrated with Microsoft Marketplace with Nokia’s operator billing agreements making it easier to purchase services in countries with low credit-card use.

This move is a part of Microsoft’s larger initiative to remain relevant in markets its currently lagging in. Microsoft is still carrying the burden of a failed Windows Mobile that may be fueling the cynicism among certain analysts. Microsoft and Motorola struck an accord back in 2003 to integrate Windows Mobile on Motorola Devices and create a virtual remote control for the on-the-go professional in order to lay seige to Blackberry. This endeavor was short lived and one year later Motorola opted for Android over Microsoft’s OS.

What’s important to note is that Microsoft’s previous deals all deal with Windows Mobile – a struggling platform that took a nosedive when Android and iOS appeared. Windows Phone 7 is unique in the sense that it offers Nokia a lot more: it’s easy to build for and has an excellent user experience.

Symbian and MeeGo will be taking a backseat but they won’t be entirely abandoned. Nokia will maintain support for support organizations that offer assistance to Symbian developers. Nokia had extensively worked on Qt in 2010 – its development environment which enables content creation for Symbian, MeeGo and PC. Now those who wish to develop for Nokia will have to switch to using Microsoft tools, use silverlight or the C#-based XNA framework for games.

Although Nokia’s track record has been less than stellar in the past 5 years, game developers are looking favorably at the deal especially since Microsoft promised to minimize fragmentation that could otherwise be a nightmare for Nokia developers had it chosen Android. Nokia determined Android wouldn’t be a good fit because it would not allow them to differentiate themselves and risk commoditisation.

“Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward,” said Stephen Elop, president and CEO. “Today, we are accelerating that change through a new path, aimed at regaining our smartphone leadership, reinforcing our mobile device platform and realising our investments in the future.”

MeeGo, Nokia’s joint OS with Intel, will be turned into an open source project and explore next-generation devices and platforms. Nokia will continue selling Symbian devices but eventually look to upsell their 200 million install base to smartphones. As a result, Nokia will be laying off a portion of its workforce in Finland and split its handset business into 2 units that are run separately: Smart Devices and Mobile Phones.

Can they succeed?

Symbian has been hampered down by its prehistoric protocols whereas WP7 is all about strong user experience that rivals the best of Android and iOS. If Nokia can successfuly incorporate Windows Phone 7, it can upsell its millions of users, especially those in China – where Nokia has 65%+ markshare. This will also allow Nokia to target usesr who aren’t ready to spend $600 for iPhones. Nokia has been slow to innovate and the managerial culture may be lacking in the flexibility necessary to adapt – but if they can pull it off they will give Apple and Google a run for their money.