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Microsoft and Nokia: 3 Reasons for a Mobile Marriage

By Shane O'Neill
February 7, 2011 03:08 PM ET

CIO - Will Nokia team up with Microsoft to put the Windows Phone OS on Nokia's mobile handsets? The idea gained steam last week after Berenberg Bank analyst Adnaan Ahmad sent an open letter to both companies pleading that they save themselves by forming an exclusive partnership.

It's doubtful that either Microsoft CEO Steve Ballmer or new Nokia CEO (and former Microsoft exec) Stephen Elop gives a hooey what a banking analyst thinks, but a mobile partnership could solve a lot of problems for both parties.

Wall Street certainly likes the idea, as shares of Nokia rose 4% throughout last week amid speculation that Nokia would announce an alliance with Microsoft that will bolster both the companies' struggling smartphone businesses.

This Friday, CEO Elop is scheduled to make a speech to Nokia investors. Speculation abounds that a Microsoft mobile partnership will be the main subject of the speech.

If such a partnership does develop it would be a departure for Nokia, which historically has looked inward for software solutions. But Nokia, which not too long ago owned about a one-third of the U.S. cellphone market, has slipped badly. Nokia's U.S. market share numbers dipped to low single digits as Apple's iPhone, RIM's BlackBerry and, especially Android based phones, have surged ahead.

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Now's the time for desperate measures for Nokia. With its market share falling off a cliff and its own expensive smartphone OS, MeeGo, failing to gain traction, Nokia may have to look to the outside world for a life raft.

With Microsoft, Nokia would have a partner who has mobile maladies too. Windows Phones are, by all accounts, solid smartphones that users seem to enjoy when they actually use them. The problem is getting people to choose a Windows Phone over other established darlings like the iPhone, Droid phones and BlackBerrys. Microsoft has a $500 million ad budget for Windows Phone 7, elite hardware partners like Samsung and HTC, plus respectable wireless carriers in AT&T and T-Mobile. But the company only sold two million units in the last quarter of 2010, which analyst Ahmad points out in his letter, "is just not going to cut it."

Here are three ways these two smartphone outcasts could benefit from Windows Phone 7 running on Nokia hardware.

Market Share Win-Win, Here and Abroad

In one way or another, both Nokia and Microsoft are in mobile market share hell --Nokia in the U.S. (low single digits) and Microsoft globally (3%). With exclusive rights to running Windows Phone 7 on its devices, Nokia could get out of the U.S. gutter and grow some share.

This story is reprinted from CIO.com, an online resource for information executives. Story Copyright CXO Media Inc., 2012. All rights reserved.
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