Staff stage walkout at Finnish firm's headquarters after it announces mobile phones will use Windows system
Nokia, the world's biggest mobile phone maker, has taken a dive into the unknown on Friday , linking up with Microsoft in a bid to compete with Apple and Google in the fast-growing smartphone market.
The alliance will also see Nokia boss Stephen Elop cut a swathe through layers of bureaucracy inside the company, which could see thousands of staff made redundant in the coming years and large parts of the research and development effort passed over to Microsoft.
The tie-up, announced in London by Elop and Steve Ballmer of Microsoft, will see Nokia adopt the Windows Phone 7 operating system in a dramatic attempt to compete in what Elop called "the war of ecosystems" against rivals' offerings. It means that by mid-2012 Nokia will phase out the Symbian OS, which was developed by British firm Psion and made Nokia the world's leading smartphone vendor.
Nokia's shares fell by 14.2% on a day of heavy trading, while Microsoft's shares dipped 0.5% in early trading in the US. However, analysts saw the move as the only viable one for Nokia, which has recorded three quarters of falling profits.
Elop, who joined Nokia from Microsoft's Office division in September, determined that the company's only hope of long-term competitiveness was to make the dramatic move. In a memo posted on Nokia's internal blog earlier this week he told staff that the company was "standing on a burning platform" and that "we're not even fighting [Apple and Google] with the right weapons". He added that Chinese rivals were turning out new devices "in the time it takes us to polish a PowerPoint presentation" and warned "the battle of devices has now become a war of ecosystems".
At Nokia's Finnish headquarters, about 1,000 employees were reported to have walked out on Friday over concerns about the fate of those working on Symbian. "About half the workforce walked off the job," said Harri T�rm�nen, president of the supervisory staff association.
Nokia, with 132,000 staff worldwide, including nearly 36,000 in research and development, is one of the largest employers in Finland. Elop said that he had consulted with the government about the planned cuts. "The best thing Nokia can do for Finland is to survive," he said, but added: "There will be reduction in employment around the world and that will affect Finland, no doubt about that."
Elop said that Nokia Windows phones would begin shipping "in volume" in 2012. Last year it sold about 100m Symbian smartphones, and Elop said it would sell "about 150m" more.
Analysts warned that the move contained considerable risks ? not least because Elop gave no exact timetable for the introduction of new Nokia Windows Mobile handsets, and that he did not explain how it would regain market share in the US, or compete with low-cost Chinese and Indian firms making cheap phones based on Google's free Android mobile operating system.
The smartphone market is seen as a key battleground by computer and mobile phone firms, because it is expected to become the dominant means by which people use the internet in the near future. Smartphones outsold PCs worldwide in the fourth quarter of 2010 by 100m to 93m.
Symbian has just been overtaken by Android, while Apple is the most profitable company in the sector, followed by RIM with its BlackBerry.
Windows Phone 7, a replacement unveiled a year ago by Ballmer for the outdated Windows Mobile operating system, has only been on sale since October through a few handset makers including HTC and Samsung.
It has had a lukewarm reception from mobile operators and buyers, with only 2m handsets shipped in the fourth quarter of last year.
The move could propel Windows Phone 7 to the leadership of the smartphone market that Nokia presently enjoys ? though analysts warned that it carries considerable risks to both companies.
Pete Cunningham of the research company Canalys said: "The big winner out of the announcements is Microsoft ? it's made an unspectacular start before and its partners before now, such as HTC and Samsung, have been focused on Android."
John Delaney of IDC said: "It's Nokia going for the best option that was available to it. It remains to be seen whether it will work or not."
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