Speculation rife that Nokia will adopt Windows Phone 7

The partnership could help the recent lackluster performance of both companies in the mobile space

An analyst's open letter to Nokia's CEO, a former Microsoft executive, has triggered intense speculation that the Finnish phone maker will adopt Windows Phone 7 as the firmware for at least some of its struggling smartphone line.

Nokia's new CEO has planned a Feb. 11 speech to investors, so far without prebriefing analysts or press. Some speculate that event could be used for a major announcement of this type.

[ InfoWorld's Ted Samson suggested in October that Nokia would have to swallow its pride and embrace Symbian or Windows Phone 7. | Stay ahead of advances in mobile technology with InfoWorld's Mobile Edge blog and Mobilize newsletter. ]

Such a software alliance could let Nokia shed some or all of its foundering mobile operating system development. And it could give Microsoft another high-profile handset maker to boost the so-far anemic sales of Windows Phone devices. Speculation and rumor has helped lift Nokia's share price by 4 percent since Monday, according to The New York Times.

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But it would be a high-stakes partnership. Nokia's share of the global cell phone market has been declining steadily. And Microsoft's huge effort to redesign its mobile OS user interface and reclaim a leading role in smartphones has so far met with lackluster sales.

The rumor mill began grinding after Adnaan Ahmad, an analyst with Berenberg Bank in Hamburg, Germany, urged the Nokia chief executive -- and former Microsoft executive -- Stephen Elop and Microsoft CEO Steve Ballmer to form an alliance that would give Nokia full and exclusive access to the Windows Phone "intellectual property."

Fueling the speculation is a planned Feb. 11 speech that Elop will give in London to investors. Elop become Nokia's first non-Finnish CEO in September. On Jan. 27, in comments at a meeting with analysts, Elop said Nokia was willing to "create and/or join other ecosystems" in the mobile phone space, according to the Times story. The comment could indicate that Nokia is considering a partnership with the Windows Phone "ecosystem."

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The proposed software alliance would mean scrapping Nokia's MeeGo OS created for its high-end smartphones, an expensive effort with little to show for it. As Ahmad noted, Nokia's smartphone market share in the U.S. has dwindled to the low single-digits.

MeeGo is a joint, open source, Linux-based software project originally launched by Nokia and Intel, and now overseen by the Linux Foundation. It merges code from two other platform efforts, Intel's Moblin and Nokia's Maemo. The WeTab tablet, which runs MeeGo and is already on sale in Europe, was demonstrated in the U.S. at the recent Consumer Electronics Show.

Nokia remains the world's leading builder of cell phones, but most of these are so-called feature phones, lacking the sophistication, software, and prices of smartphones like Apple's iPhone or RIM's more recent BlackBerry products. The analyst suggested that Nokia's Symbian OS be relegated quickly to the low- and mid-range product lines, to defend against encroachment by devices running Google's fast-growing Android OS. Eventually, Ahmad said, economies of scale will let Nokia shift Windows Phone into this market also.

Ahmad's recommendation was in a letter (PDF) that appeared Monday in The Financial Times.

Nokia's share of the global smartphone market fell to 31 percent in Q4, down from 40 percent a year earlier; the company's profit plunged even more, by 21 percent, according to The New York Times.

Ahmad argued that Microsoft needs a high-volume smartphone maker like Nokia, which would be focused entirely on Windows Phone. Currently, handset makers like HTC, Samsung, and LG also are heavily invested in Android phones. In January, Microsoft revealed that in eight weeks, it had shipped 2 million copies of Windows Phone 7 to its handset customers. There are still no retail figures on the number of Windows Phone handsets that have been activated on mobile operator networks.

John Cox covers wireless networking and mobile computing for Network World.
Twitter: http://twitter.com/johnwcoxnww
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