Nokia chooses Windows Phone 7 OS for smartphones

In a dramatic break from the past, Nokia and Microsoft have banded together in the fast-growing smartphone marke to offer Windows Phone 7 as the ‘primary smartphone plaftorm’. With the rise of Google’s Android, Nokia is desperately attempting to regain its position as the leading player in the sector.

“Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race,” said Nokia’s Chief Executive Stephen Elop after the rumours of the partnership between the two companies.

This strategic alliance ensures Windows Phone 7 is Nokia’s primary smartphone platform. It will include a number of other Microsoft services such as Bing, Xbox Live and Office.

Google’s Android, which is supported by mobile manufacturers like Samsung and Sony Ericsson Mobile Communications, provide users a slick interface similar to that iPhone for a lower cost of ownership. Last month CE Eric Schmidt said Google is activating more than 300 000 phones a day.

Investors have not responded well to the news — a sign of the challenge Nokia is already facing at this early stage. Shares fell 9.8 percent after the announcement of the plan to shift to Microsoft Windows as its primary software platform.

“It’s a clear admission that Nokia’s own-platform strategy has faltered,” says Ben Wood, a London-based analyst with CCS Insight when referring to Nokia’s announcement. “Microsoft is the big winner in this deal, but there are no silver bullets for either company given strength of iPhone and Android,” he added. Geoff Blaber of the same company said that “this is a partnership born out of both parties’ fear of marginalization at the hands of Apple and Google but there is no silver bullet,”

Android phones usually have more flexibility in data plans than the iPhone, which means using programs like Skype bring down monthly costs for users. Google is also coming close to its ambition to reach the $100 threshold for an Android as the company recently told Memeburn.

Following the memo that circulated on Wednesday an official announcement from Nokia and Windows has been eagerly awaited.

Analyst Jussi Hyoty said both companies have enormous resources: “If they are allocated well, and they are able to reach the same agility as Apple and Google, there are fairly good chances for them. An Android partnership would have been more difficult to build for Nokia.”