Nokia dials up Microsoft for smartphones

Nokia has announced plans for a ‘broad partnership' with Microsoft, as it attempts to recapture ground lost to Apple and Google.

Nokia will use the new Windows Phone 7 as its primary smartphone platform, working with Microsoft to develop the technology further. Alongside the partnership, the Chief Executive, Mr Stephen Elop, also announced management changes effective from April 1 and the creation of a new leadership team.

Operations will now be split into two main business divisions: Smart Devices and Mobile Phones. While the firms did not outline the scale of cost savings, particularly in research and development, Mr Elop said he expected these to be “significant.”

“Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward,” he told a press conference in London.

A major announcement had been expected after Mr Elop launched a stinging attack on his own firm earlier this week. Nokia didn't have a product close to the iPhone and was standing on a “burning platform” the former head of Microsoft's Business division told bemused employees in a leaked memo.

Mr Elop said he had explored a number of partnerships, including with Google, but had determined that Microsoft had provided the best opportunity for the firm to build a new technology ecosystem to take to the market. “This is now a three-horse race,” he added.

While the Microsoft Phone 7 technology would be the primary platform, the firm will continue to sell its mid-market Symbian devices. The highly-publicised Mee-Go would be shipped out later this year, but would be used mainly for longer-term market exploration of new products. A number of services assets will be combined, with Nokia using Bing and AdCenter.

Nokia shares plummeted on Friday, with the market treating the announcement as a candid acknowledgement that the firm's platform and service strategy had faltered.

“Microsoft has clearly got the most out of this deal – it gives it enormous scale and distribution network,” said Mr Geoff Blaber, an analyst at CCS Insight in London.

“It is clear that (Mr Elop) has a good handle on the size of the challenge – but whether it's the right move remains to be seen and it is clear that the company has a huge gulf to cross to catch up.”

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