More evidence for a Nokia-Microsoft Windows Phone 7 deal

There's more potential evidence for a deal between Nokia and Microsoft for Windows Phone 7: Nokia CEO Stephen Elop will likely fire his top management team, including the one in charge of Nokia's mobile phone division.

Rumors of such a Microsoft-Nokia deal have been rife ever since analyst Adnaan Ahmad of Berenberg Bank in Hamburg wrote an open letter in the Financial Times suggesting that Microsoft CEO Steve Ballmer and top Nokia executive Stephen Elop (a former Microsoft exec) form a partnership.

To Elop he suggested:

"Announce an EXCLUSIVE deal with your ex-colleague, Steve: you get access to their WP7 intellectual property (IPR) scot-free and access to the US market where your share has dived to the low single-digit level, and in so doing cut your bloated handset business R&D budget by at least €1bn ($1.4 billion), or 30%, which should add 300 bps to your operating margin. Get rid of your own proprietary high-end solution (MEEGO) -- it's the biggest joke in the tech industry right now and will put you even further behind Apple and Google.

"Focus your high-end portfolio around WP7, and over time you can take the cost down (that's Steve's job and cost base) to get this into the mid-range market.

To Ballmer, he wrote in the open letter:

"two million units shipped in the last quarter is not really much to write home about, given $500m in marketing programmes (ouch), but with Nokia on-side, you get access to a potential 20-25 percent global share over time--and exclusivity. You need to tie yourself to a high-volume player to be relevant."

The arrangement could boost Windows Phone 7 sales in Microsoft's attempt to gain against Android and the iPhone, and help Nokia, the one-time U.S. market leader, which has fallen to only 2 percent of the U.S. market.

Reuters quotes the German weekly Wirtschaftswoche as reporting that Mary T. McDowell, in charge of Nokia's mobile phones unit, and Niklas Savander, the manager of the markets unit, may both be on the chopping block. Also possibly being let go might be Chief Development Officer Kai Oistamo and Tero Ojanpera, the manager responsible for services and mobile solutions.

Given that these are the people in charge of the strategy that has led to Nokia's current woes, it would make sense if they were to go if a Microsoft deal were in the works.

In addition, Reuters says that Elop may make an announcement about a Nokia reorganization, including the shakeup, at a February 11 speech Elop will be giving in London to investors --- the same meeting at which it is rumored he'll announce the Microsoft deal.

Of course, there's no way to know yet whether any of these rumors are true. But a Nokia-Microsoft deal would a big win for Microsoft, because without it, there's no clear way for Windows Phone 7 to make up any ground against the iPhone and Android.

Copyright © 2011 IDG Communications, Inc.

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