photoNokia and Microsoft say they are forming a broad strategic partnership that would use their combined expertise to create what they called a new "global mobile ecosystem."

Nokia is the world's top provider of mobile phones, which has seen its market share shrink lately amid the growth in smartphone competition from Apple, HTC and Research In Motion (RIM). Microsoft is the software giant that has been seeking traction for its mobile OS platform, Windows Phone 7.

The two companies say they intend to jointly create market-leading mobile products and services designed to offer consumers, operators and developers unrivalled choice and opportunity. 

The two companies believe their dominance in their relative markets give them a distinct advantage. The partnership, they say, would create the opportunity for rapid time to market execution.  Additionally, Nokia and Microsoft say they plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets.

Under the proposed partnership:

  • Nokia would adopt Windows Phone as its principal smartphone strategy, innovating on top of the platform in areas such as imaging, where Nokia is a market leader.
  • Nokia would help drive the future of Windows Phone.  Nokia would contribute its expertise on hardware design, language support, and help bring Windows Phone to a larger range of price points, market segments and geographies.
  • Nokia and Microsoft would closely collaborate on joint marketing initiatives and a shared development roadmap to align on the future evolution of mobile products.
  • Bing would power Nokia's search services across Nokia devices and services, giving customers access to Bing's next generation search capabilities.  Microsoft adCenter would provide search advertising services on Nokia's line of devices and services.
  • Nokia Maps would be a core part of Microsoft's mapping services.   For example, Maps would be integrated with Microsoft's Bing search engine and adCenter advertising platform to form a unique local search and advertising experience
  • Nokia's extensive operator billing agreements would make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.
  • Microsoft development tools would be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem's global reach.
  • Nokia's content and application store would be integrated with Microsoft Marketplace for a more compelling consumer experience.

 Three-horse race

"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 Steven A. 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."

PC Magazine calls the move a big win for Microsoft, pointing out that Windows Phone 7 has gone from afterthought to the number one platform for the number one mobile device manufacturer. The big loser, it says, is Nokia.

"This is a humiliating climbdown for Nokia, which basically admitted that it's been wasting a huge software R&D budget and that its OS engineers are incompetent," the magazine said in an online posting.