Nokia chief Stephen Elop says mobile phone company will use Windows Mobile 7 as its primary smartphone platform
Embattled mobile phone firm Nokia has signed up to a "broad strategic partnership" with Microsoft in an effort to rebuild its fortunes.
Stephen Elop, Nokia's recently appointed chief executive, said Nokia will use Windows Mobile 7 as its primary smartphone platform. Elop has also shaken up the senior management team, having warned staff this week that the company was standing on a "burning platform".
Speaking in London this morning, Elop said the partnership meant the mobile market was now a "three horse race", with Nokia-Microsoft competing strongly with Apple, and Google's Android platform.
Steve Ballmer, Microsoft's chief executive, said the alliance would "dramatically accelerate" the take-up of handsets running Windows Mobile. But the initial reaction to the deal was muted, with Nokia shares falling by 10% in early trading in Helsinki.
Under the plan, Nokia said it would use its expertise in hardware design, imaging and mapping to improve the Windows Mobile platform. The two companies will work together on marketing, and develop a common roadmap. Bing, Microsoft's search service, will be integrated into Nokia devices.
Once an undisputed leader of the mobile industry, Nokia is now struggling to keep up with Android and the iPhone, as well as RIM's BlackBerry.
Nokia said it will continue to make phones running its Symbian operating system, thus "leveraging previous investments to harvest additional value". Symbian, though, will be relegated to the status of a "franchise partner".
MeeGo, Nokia's Linux-based open source mobile operating system, will also continue ? but with a focus on "longer-term market exploration". Alberto Torres, who had led the development of MeeGo, is leaving Nokia.
Elop's announcement had been heavily anticipated, with many commentators expecting a tie-up with Microsoft. Analysts said there was some disappointment over Elop's new financial targets. They include growing sales faster than the market from 2013, with profit margins over 10%.
John Strand, chief executive of Strand Consulting, warned that there will be "massive layoffs" at Nokia, particularly across its research and development division.
Elop confirmed jobs would be cut both in Finland and across the world.
Tony Cripps, principal analyst at Ovum, said Elop had made the right decision for Nokia's future.
"There were few short-term options available to the company to help it get back on terms with Apple and especially the Android masses, which in 2011 look set to overtake Nokia in terms of smartphone shipments, bringing with it the full wrath of the investor community," said Cripps.
Andrew Harrison, chief executive of Carphone Warehouse and Best Buy, believes the deal should benefit consumers.
"The deal makes Microsoft a key contender and gets Nokia back to the forefront of the smartphone revolution," Harrison said.
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