Nokia - Microsoft Strategic Partnership in Smartphone market

Nokia - Microsoft Strategic Partnership in Smartphone market

On February 11, 2011, Nokia and Microsoft announced their plans to form a strategic partnership to bring their strength and expertise together for creating new global ecosystem. Both the companies plan to combine their assets to produce innovative mobile products catering to the needs of consumers, operators and developers. Additionally, companies will also work to integrate new assets and new service offerings for new markets. These strategies are aimed to provide strong competition to their rivals Google and Apple in the Smartphone market. Nokia has been consistently losing their market share in Smartphone market. As a part of this strategy, Nokia will be replacing their current mobile platform Symbian by Microsoft windows phone seven operating system on its devices as their primary smartphone platform.

Nokia and Microsoft deal will be helpful to both the companies. Microsoft will be getting the advantage of Nokia's vast network and dealers and stores, where Apple won't be able to have stores for a long time to come. On the other hand, Microsoft has exceptionally great developer's tools with .NET community and ecosystem. This partnership will help Nokia to comeback in the market which it lost to the likes of Apple's iPhone, and products based on Google's Android platform. The partnership had hurt the chances of Intel entering in mobile phone market. Microsoft is concerned about low adaption rate of windows 7 in the mobile market, but is confident of overcoming this challenge with hardware partner like Nokia.

With this deal, Microsoft gets instant share of 35% of world's mobile phones. Microsoft has agreed to sell windows 7 operating system for Nokia phones at almost zero prices and to share profits generated from the ecosystem. Nokia has chosen Microsoft against Google Android. Surprisingly after the deal, Nokia's shares fell 14 percent, the steepest slide since July 16, 2009. The deal is supposed to be a survival step in smartphone market, where company's market share fell from 50.8% to 27.1% since Apple introduced iPhone in the market in 2007. Nokia also plans to optimize its R&D spending. Nokia's current R&D expenses amount to 5.9 billion Euros ($8.1 billion), which is four times, that of Apple. Nokia also declared the plans to have two units, one is smart devices and another will be mobile phones. Partnership with Microsoft will play an important role in the smart phone division.

The biggest question mark after the partnership is over success of the deal. With complementary strengths of both the partners, it is clear that partnership will go a long way in helping Nokia to regain its share in the Smartphone market. The success of partnership also depends upon the competitor's strategy. One of the elements to the success is its product design strategy. Overall the interest of both the companies is aligned to only one goal which is control over the smart phones business. With the sudden departure of Steve Jobs (who went on medical leave), it is feared that lack of innovative ideas might force Apple to go on back foot. Nokia should leverage this partnership with Microsoft to unleash latest innovative technology in the Smartphone market to regain the lost market

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