Nokia announces strategic alliance with Microsoft: Windows Phone 7, Bing, Xbox Live, Office

Nokia just dropped the bombshell we predicted yesterday: a wide-ranging “strategic alliance” through which:

• Microsoft’s Windows Phone 7 OS will become Nokia’s “principal smartphone strategy”
• Microsoft’s Bing and adCenter will provide search and advertising for Nokia Windows Phones
• Nokia’s Ovi Maps content will become part of Bing Maps
• Nokia’s app and music stores will integrate into Microsoft’s (Windows Phone / Zune / Xbox) Marketplace
• Like all Windows Phones, Nokia handsets will now also feature Xbox Live and Office

Nokia CEO Stephen Elop (former head of Microsoft’s Business Division) and Microsoft CEO Steve Ballmer said:

“There are other mobile ecosystems. We will disrupt them. There will be challenges. We will overcome them. Success requires speed. We will be swift. Together, we see the opportunity, and we have the will, the resources and the drive to succeed.”

Read on for more about the Nokia-Microsoft deal.

As we indicated yesterday, the deal could make a lot of sense: Nokia is still at the top of its hardware game, producing among the highest-quality handsets on the market, but its software efforts (Symbian, MeeGo) have foundered.  Microsoft’s Windows Phone 7 OS provides arguably the smoothest user experience in the industry but has a lot of ground to regain in market share against Apple’s iOS and Google’s Android.

A combination of Microsoft’s mobile software prowess and strong developer relations with Nokia’s hardware design and global retail presence, especially in emerging markets, could be a force to reckon with.  A potential risk for Nokia lies in the fact that Microsoft tightly controls the user experience on Windows Phones to ensure uniformity and high performance.  As a result, Nokia might not be able to sufficiently differentiate itself from other Windows Phone 7 handset manufacturers, from HTC to Samsung, LG, Dell, and the like.

Nokia says it plans to innovate “on top of the platform” — what that will entail remains to be seen.  The first Nokia Windows Phones should hit the market in late 2011 or early 2012.  The company is planning a significant cut in R&D staff and has entirely reshuffled its leadership to match the new strategy.  Symbian and MeeGo are most likely dead as consumer OSes, and Nokia is unlikely to support its Qt framework, which WP7 does not support.  Windows Phone 7 remains a smartphone OS, though — and one that requires serious hardware capabilities, at that — so Nokia will still need a separate platform for feature phones, likely Series 40.

Here’s the official announcement:

Press Release:

Nokia and Microsoft Announce Plans for a Broad Strategic Partnership to Build a New Global Mobile Ecosystem

Companies plan to combine assets and develop innovative mobile products on an unprecedented scale.

LONDON – Feb. 11, 2011 – Nokia and Microsoft today announced plans to form a broad strategic partnership that would use their complementary strengths and expertise to create a new global mobile ecosystem.

Nokia and Microsoft intend to jointly create market-leading mobile products and services designed to offer consumers, operators and developers unrivalled choice and opportunity. As each company would focus on its core competencies, the partnership would create the opportunity for rapid time to market execution. Additionally, Nokia and Microsoft 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.

“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.”

Please visit www.nokia.com/press for press materials.