Nokia teams with Microsoft for Live apps

In a pairing of the world’s two biggest smartphone rivals, Nokia and Microsoft today said they are cooperating to build a suite of specially designed Windows Live services for Nokia phones.

Microsoft said it would develop Windows Live Hotmail, Messenger, Contacts and Spaces applications specifically for Nokia’s Symbian OS-based Series 60 platform, which powers the majority of Nokia’s consumer and business smartphones. Next year, Microsoft will extend those services to Nokia’s Series 40 platform, which powers most of Nokia’s mid-range and feature phones, potentially giving Microsoft a huge presence in millions of phones worldwide.

Nokia is by far the market leader in smartphone sales and has even succeeded in licensing its Series 60 middleware to competitors that make Symbian-based phones. But Microsoft has challenged Nokia’s dominance in several key markets, particularly in the U.S. where Nokia’s GSM phones can’t gain traction against CDMA rivals. The Microsoft Windows Mobile OS has enjoyed success in Asia, though in key markets like China, both Symbian and Microsoft platforms are heavily challenged by Linux-based phones.

In the current deal, Microsoft will effectively become an applications developer for the Nokia phones. The Symbian OS already contains the ActiveSync protocol necessary to link with Exchange, but the live services extend far beyond enterprise email, giving customers access to Microsoft’s growing library of Live Web-based services. The Live services will be available for download to Series 60 phones today and next year to Series 40 phones.

In other news, Nokia said India has passed the U.S. as the Nokia’s second-largest market for phone sales, behind China. China is world’s largest market by any measure. Wireless Intelligence estimates China will surpass 500 million mobile subscribers this quarter, but India is catching up quickly, fast approaching the U.S. in overall subscribers.

For Nokia, the U.S. is an important market because of its size. Though its market share is far higher in most European countries as well as Asian and Latin American markets, the sheer volume of sales in the U.S. makes a significant impact on its overall shipments, despite the fact the top three sales slots in the U.S. belong to Motorola, Samsung and LG Electronics.