Nokia-Microsoft: Will they succeed or continue to limp along in smartphones?

Early success seems elusive for both, analysts say

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Why not use the Android OS instead of Windows Phone, as many argued? "The argument against Nokia going with Android was that Nokia already had great assets to leverage against Google," Stofega said. One example is Nokia's NavTeq navigation software, which would go up against Google's own Maps Navigation software, Stofega said, meaning that Nokia's investment in NavTeq would probably lose.

"For both companies, it's pretty important that the partnership succeeds," Stofega said. Long term, the partnership "has a very good chance of succeeding, given the capabilities of the two companies. What has held Nokia back was a good OS and an investment in an OS. Windows Phone could be a pretty good investment and give them wind in their sails. Short term, there's a question of what happens," he added.

But Stofega sounded like a optimist compared with other analysts who follow the smartphone market. Said Carolina Milanesi at Gartner: "I think [Nokia and Microsoft] have a better chance together than alone, but their main issue will remain brand perception in the eyes of the consumer in the high end of the market. Nokia didn't really have a choice [other than to pick Windows Phone], as Android would have been a much harder play for them."

She explained that with Microsoft, Nokia can become the "preferred partner" for Windows Phone OS, or possibly the only partner. "With Android, that would not have been the case," Milanesi said, noting that manufacturers such as Samsung, HTC and LG "can walk away from Microsoft, but they cannot walk away from Android."

In the near term, Microsoft stands to gain more from the partnership than Nokia, since the software maker finished with 3.4% of smartphone sales to customers in the fourth quarter of 2010, ranking fifth, Gartner said. In contrast, Gartner said Nokia's Symbian OS had 32.6% of the smartphone market in the fourth quarter, down from 50% four years earlier when the iPhone and Android phones were emerging.

In the fourth quarter, Android had 30.8% of the smartphone market globally, Gartner said, while Apple's iOS had 16% and Research In Motion's BlackBerry had 13.7%. Slightly more than 100 million smartphones were sold in the quarter.

Some analysts were unwilling to wager how well the partnership will do. "Perhaps combining the two companies can create one strong competitor, or perhaps they will both continue to limp along," said Jeff Kagan, an independent analyst. "I wish them much success but remain concerned until I see some kind of positive activity. This is difficult for them both."

Ballmer and Elop seemed undeterred by skeptics in an open letter posted on both the Nokia and Microsoft Web sites: "There are other mobile ecosystems. We will disrupt them. There will be challenges. We will overcome them. Success requires speed. We will be swift."

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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