Nokia, Microsoft Confirm ‘Make-Or-Break’ Partnership

Global handset-maker Nokia on Friday announced plans to form a strategic partnership with Microsoft, representing a potential threat to its rivals in the burgeoning smartphone market and reflecting what one analyst called a “make-or-break strategy” for both companies.

Among other plans, the proposed partnership calls for Nokia to adopt Microsofts Windows Phone software and for the companies to collaborate on joint marketing initiatives and a shared development roadmap in connection with future mobile products.

Although Microsoft and Nokia are two of the biggest names in the consumer electronics industry and manage huge marketing budgets, Informa Telecoms & Media analyst David McQueen said the proposed partnership is a risk.

Its hard enough for massive companies to innovate on their own much less with another massive partner with a completely different culture,” McQueen said in a research note.  

Under the proposed partnership, Microsofts search engine Bing would power Nokias search services across all devices and services. Meanwhile, Microsoft adCenter would provide search advertising services on Nokias line of devices and services.

Microsoft and Nokia further revealed plans to use Microsoft development tools to create applications that would run on Nokia Windows Phones. The companies also said Nokias extensive operator billing agreements would make it easier for customers to purchase Nokia Windows Phone services in countries where fewer people use credit cards.

Nokia is the worlds largest handset-maker, but the company has not fared well in North Americas burgeoning smartphone market. The company shipped nearly 500 million handsets and 100 million converged devices worldwide last year, according to Strategy Analytics.

Worldwide, Nokia still leads sales in the smartphone market based on the number of its Symbian operating systems shipped last year, according to research firm Gartner. About 111.6 million units were sold last year to end users, reflecting 37.6 percent market share, the research firm disclosed Wednesday.

But Gartner reported that Nokias market share in the smartphone market declined 6.7 percentage points from 2009.

McQueen of Informa Telecoms & Media said greater competition in the smartphone market results in more innovation and better devices, helping mobile operators increase the number of subscribers with data plans. 

But while operators might view the MS-Nokia tie up as a net positive, ultimately it will be users who choose what phones they want to buy,” the analyst said.  Thats why we have to expect Nokia and Microsoft to match their bold move by making bold marketing investments to fund sell-through efforts via the operators retail channels.”

Rumors of a potential partnership between Nokia and Microsoft germinated after an analyst with Berenberg Bank in Hamburg, Germany urged the companies chief executives to align. 


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