Nokia, Microsoft alliance focused on scale

Stephen Elop, chief executive at Nokia, has said market scale and reach, combined with access to Office, XBox Live and Bing, are the main reasons for the companys new alliance with Microsoft.

Analysts broadly gave a positive reaction to the move, but advised Nokia not to become merely a vehicle for Microsoft.

Windows Phone 7 would become the main smartphone platform for Nokia products, Elop said at a strategy presentation in London this morning. The announcement comes two days after the publication of a leaked memo from Elop to staff, in which he reportedly wrote that Nokia stands on a burning platform surrounded on all sides by faster-growing competitors.Elop reiterated today that Nokia faced serious threats from its rivals. We face competition from many different directions, he said. We should be setting the pace.

Describing the smartphone market as having changed from a battle of devices to a war of ecosystems, Elop said the company would build a global ecosystem beyond anything that exists, with unrivalled scale, as a result of the Microsoft tie-up.

Crucially for both firms, Elop said, the alliance would create opportunities for Bing, Xbox Live, Office and other Microsoft products with growing potential on mobile devices.

Microsoft chief executive Steve Ballmer was also at the launch. The alliance would drive innovation at the boundary of technology, he said.

Ballmer added that the companies would collaborate closely on development and marketing. He said: We should expect a rapid development of the Windows 7 ecosystem.

Forrester analyst Ian Fogg said the new alliance was a significant win for Microsoft, because it had signed by far the largest phone maker globally. It was also important that Nokia was the first Windows Phone 7 device partner to make the operating system its primary platform.

Nokia would have to move quickly to launch new products with the OS, he said. But at the launch, the companies were unable to give a date for the first product release.

Tony Cripps, principal analyst at Ovum, said the tie-up was a bold move by Nokia. There were few short term options available to the company to help it get back on terms with Apple and especially the Android masses, he said.

But analysts also warned of the effect on the Symbian system and on Nokias overall outlook. Adam Leach, another principal analyst at Ovum, said it was ironic that the sole purpose of Symbian was to stop Microsoft from repeating their domination of the PC market in handsets, and now Nokia had created an agreement with Microsoft.

He added: There remains a danger that Nokia could end up as merely a vehicle for Microsoft and services should it fail to differentiate from other Windows Phone 7 makers such as HTC, Samsung and LG.

Richard Holway, chairman at TechMarketView, said it was an important tie-up for the two companies.

Partnerships only work when both parties need it badly and the very survival of both Nokia and Microsoft in the mobile space now depend on it being a success, he said. The combination of these two last generation powerhouses deserves to be taken very seriously.

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