Nokia Oyj, the world's biggest maker of mobile phones, has announced a software partnership with Microsoft Corp, to take on the challenge posed by Google Inc and Apple Inc.
Nokia's shares were down as much as 12 per cent, the steepest fall in 10 months following the company's plan to make Microsoft's Windows its primary software was seen as an indication of the strong challenge from Apple's iOS and Google's Android platforms.
According to analysts, the move was a clear admission of Nokia's own platform strategy having faltered. They add the winner in the strategy would be Microsoft, but both companies had no readymade solutions to live up to the challenge at the moment.
Stephen Elop, Nokia's new chief executive officer is struggling to revive the company after the huge fall in the company's market share which was down to 27.1 per cent last quarter from 50.8 per cent when Apple shipped its iPhone in June 2007, according to Gartner Inc. The company has lost over 60 per cent of its market value in that time.
Microsoft, whose Windows Mobile software licenses were doubling annually prior to the appearance on the scene of iPhone in 2007 has been struggling to win acceptance for its revamped Windows Phone 7 software. According to the Redmond, Washington-based software maker, it shipped over 2 million licenses for the new smartphone system in its first quarter on the market.
Under the plan unveiled today, the two companies would combine assets develop mobile products on a joint basis. The two companies will collaborate on joint marketing with Nokia's Maps product integrated into Microsoft's services, while Microsoft's development tools would create applications for Nokia Windows phones.
''Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale,'' Elop said at a press conference in London. ''It's now a three-horse race.''
According to Nokia, following the 2011 and 2012 ''transition years'', it would target Devices & Services non-IFRS operating margin of 10 per cent or more.
Analysts say the biggest question mark was the timetable. They point out that though Nokia says 2011 and 2012 would be transition years, how far its rivals would be by then would be anybody's guess.
Elop, 47, was hired from Microsoft in September to put Nokia on a comeback trail, especially for software, the biggest point of difference in smartphones.
Making only small adjustments in his first months even as he reviewed the business, he announced 1,800 job cuts in the workforce of over 120,000. He has further adjusted the development process for the Symbian smartphone code, and brought in a new marketing chief, Jerri DeVard.