**Editor's Note: Click here for our list of February's hottest selling smartphones to see how Nokia's Lumia 920 measured up against Apple's iPhone and the rest of its competition.**
Nokia's team-up with Microsoft for its Windows Phone operating system was a risky one – one that's paid off in some ways but fallen short in others.
The Finland-based company, which was once the dominant leader in mobile phones, was left behind by Apple and a bevy of Android manufacturers a few years ago. In an attempt to play catch-up, the company announced a partnership with Microsoft in 2011 to launch a line of Lumia smartphones to run on the Redmond, Wash.-based software giant's Windows Phone OS.
Nokia recently acknowledged in an SEC filing that the partnership wouldn't stop Microsoft from developing its own branded smartphone in the future – something that's been widely tossed about since MSFT unveiled its Surface tablet PC last fall. Another risk: What if the software company discontinues the Windows Phone platform?
While Nokia's flagship Lumia 920 and a handful of other devices have experience decent sales backed by a big marketing push from the two companies, the manufacturer is still way behind Apple and Samsung in market share. Just competing for third place will no doubt be challenging against the likes of Motorola, HTC, BlackBerry's pending BB10 smartphones and several other vendors.
“When Nokia decided to commit to Microsoft’s Windows Phone platform it all made sense at the time," noted Yankee Group senior analyst Boris Metodiev, commenting specifically on a ZDNet article about the SEC filing. "It was believed the move would help the Finnish manufacturer differentiate from the plethora of Android devices, and then there was the small matter of U.S.$1 billion dollars Microsoft was about to pay Nokia annually to subsidize its Windows Phone devices. [But] just two years into the relationship, not everything seems to be so rosy for Nokia. Even though the Lumia 920 and 820 flagship phones have been widely acclaimed for their quality and performance, they haven’t been selling as much as the manufacturer would have liked. On the top of that, in its 2012 annual report Nokia stated that royalty payments to Microsoft for the use of Windows Phone OS are likely to exceed the amount the software giant pays to subsidize the Nokia phones by the end of their five-year agreement.
Metodiev remains cautiously optimistic about the Nokia-Microsoft partnership, but not enthusiastic,saying that it was a safer choice for Nokia than turning to Android.
"No phone manufacturer except Samsung makes much money from using Android, and choosing that path would have meant an almost certain death for Nokia," Metodiev added. "Microsoft’s cash injection will continue to help balancing Nokia’s finances for another three years and its Windows Phones will slowly build much-needed traction in the market. Unfortunately for both parties, I doubt that Nokia will ever regain its former glories and Microsoft will always play catch-up in the mobile space."
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