Nokia, Microsoft team to battle Apple, Google in smartphone tilt

Ending weeks of rumors, Nokia today announced a wide-ranging partnership with Microsoft including the crown jewel: it will use Windows Phone as the core operating system on its smartphones, replacing Symbian OS.

Other pieces of the deal, details of which were laid out in a blog post co-signed by Nokia CEO Stephen Elop and Microsoft CEO Steve Ballmer this morning, included joint marketing and development efforts by both companies to move the Windows Phone platform forward; movement of of Nokia content and apps into Microsoft Marketplace; integration of Bing search into Nokia devices and services; and, in the other direction, integration of Nokia Maps into Microsoft's own mapping and advertising platforms.

"Clearly Nokia is facing challenging and very dynamic times right now," Nokia CEO Elop said in a press conference announcing the deal (see video below). "The game has changed from a battle of devices to a war of ecosystems."

While Windows Phone is just getting out the door -- making its "ecosystem" limited at best -- Microsoft's entire business is built around building partner and developer value chains. The combination of Nokia hardware market share around the world with Microsoft's software strength (and admittedly slick Windows phone software) could potentially set the pair up as a solid rival to Apple and Google.

Nokia and Microsoft need each other; both are being surpassed by smartphone (and now tablet) rivals, mainly Apple with the iPhone and iPad and Google with its ecosystem of Android developers and operator partners.

Just last week came a report that Android had leaped over Nokia for the first time in smartphone shipments in in Q4, shipping in 33.3 million devices compared to Nokia’s 31 million.

Connected Planet's wireless editor Kevin Fitchard described the market dynamics like this: "Nokia has dominated the smartphone market since its inception, at one point holding well over 60% of the total market. But Apple’s iPhone first started knocking Nokia down a few pegs, and then Android began leaping over whole sets of pegs entirely."

Nokia Re-Organization Accompanies Partnership Deal

The Microsoft deal is just one part of Nokia's new strategic direction.

The company announced a new corporate structure, with two business units: Smart Devices (focusing on smartphones, tablets and other devices) and Mobile Phones (focusing on mass market phones).  

As for platform support, Windows Phone will be the primary smartphone platform moving forward; Symbian will remain in place as Nokia supports existing users and sees some opportunity for future sales; yet another Nokia OS, MeeGo, becomes an open source, more experimental project, the company said.

On the telecom equipment side, Nokia Siemens Networks (NSN) remains part of the Nokia group.

Nokia provided additional details about the partnership in a strategy presentation Friday. See a video excerpt from that announcement now, and check back for more details and analysis on Nokia's strategy later today: