Nokia said it is forming a software partnership with Microsoft and will use Windows Phone as the primary software platform in its smartphones.
The move is part of Nokia’s strategy to take on rivals in the fast growing smartphone market — Apple and Google. In 2010, smartphone sales overtook those of PCs for the first time ever.
The new formed group will have financial targets as well.
Nokia said it will use Windows Phone as the software platform for its smartphones as part of new chief executive Stephen Elop’s overhaul of the phone maker. The company said its existing smartphone operating system Symbian will become a "franchise platform".
Under the "broad strategic partnership", while Microsoft’s Bing will power Nokia’s search services, Nokia Maps will be at the core of Microsoft’s mapping services.
Earlier this week Elop had already indicated that Nokia may witness a major overhaul and that it might also go for a third party operating system, outside its own Symbian software.
In an internal memo of the company, Elop, a previous employee at Microsoft, wrote, "Nokia, our platform is burning. It will be a huge effort to transform our company."
Nokia’s profits had registered a drop of 16% in the fourth-quarter last year.
Increasingly, the high-end and midrange smartphone markets are being captured by Apple and Google’s Android OS run smartphones. Nokia has failed to make an impact in the large and profitable North America market. Meanwhile, in the low-end hand-set market, Nokia’s profits have dipped following the entry of less-expensive Asian alternatives.
However, Microsoft is also lagging behind in the smartphone market. Its OS for mobile phones, Windows Phone, has not lived up to expectations. A study by research firm Canalys placed smartphones running Windows Phone at 3.1% of the global smartphone market in the fourth quarter, behind Google’s Android, Nokia’s Symbian and Apple’s platform.
"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," Stephen Elop, Nokia President and CEO, said at a joint news conference in London. "Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race."
"I am excited about this partnership with Nokia," said Steve Ballmer, Microsoft CEO. "Ecosystems thrive when fueled by speed, innovation and scale. The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute."
At the London press conference this morning Elop expanded on the thinking behind choosing Microsoft ahead of Google’s Android operating system.
"We have three choices," he said. "We could focus on the internal development of Meego and Symbian but we were worried about the potential speed of development of those platforms without a partner like Microsoft. We looked at Android but while there are attractive elements to it, the commoditisation risk was very high, with value being moved out of Google and that was worrying to us."
Elop also confirmed that restructuring at Nokia will result in "substantial" job losses across the world, including at its Finnish headquarter. There are, however, no plans to move operations away from there, he added.
"By adopting Windows Phone as our primary smartphone platform we believe we can deliver a global ecosystem that goes beyond what exists today in terms of hardware, software, services and apps," Elop said.
