Nokia and Microsoft today announced a partnership to develop Windows smartphones, in a desperate effort to gain ground on Apple and Google in the fiercely-competitive smartphone market.
The alliance is expected to sink Nokia into a two year "transition period," where it warned of dismal short-term results.
"We will combine our strengths to deliver an ecosystem with unrivaled global reach and scale," said Stephen Elop, Nokia's chief executive and a former Microsoft executive. "We are at a critical juncture, where significant change is necessary and inevitable in our journey forward."
Many analysts see the deal as a coup for Microsoft. Under the terms of the agreement, Nokia will also integrate Bing search engine across all its products, giving the software giant added reach and ammo to challenge Google in the mobile search space, as well as share its Nokia Maps technology with Microsoft's mapping services.
In addition, Ovi app store will be combined with Microsoft Marketplace.
Nokia and Microsoft are working together out of necessity. Nokia didn't anticipate the shift in consumer demand to higher-end smartphones, while Microsoft failed to make inroads with its Windows Phone 7 software.
Now, both embattled companies are seeing their market share eroded by Apple and Google, whose iPhone and Android products dominate the lucrative, and fiercely-competitive, sector.
For Nokia, the situation is dire. Earlier this week, in an internal memo, Elop compared its scenario to a man standing on a "burning platform," faced with the choice of jumping into an icy ocean to escape the flames.
"Our platform is burning," he wrote. "And we must decide how we are going to change our behavior."
Microsoft, meanwhile, after a series of misfires and failed software pushes into mobile, is finally getting a vendor to push its Windows Phone 7 software.
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