Nokia a big win for Intel but next steps unclear

The world’s largest chipmaker Intel (NASDAQ:INTC) today added leading handset maker Nokia (NYSE:NOK) to its partner list to create Intel Architecture-based mobile computing devices and chipset architectures. The partnership is a big win for Intel, which has been trying to penetrate the competitive wireless market for some time now, but without any specific devices announced, at least one analyst isn’t ready to call it a game-changer.

“All of a sudden, Intel now has an HSPA 3G license,” said Jim McGregor, research director at In-Stat. “So what, are they going to replicate what they’ve already done with XScale? Will they be successful this time? Some of that is kind of scary. Where is this really leading to? They are not really pointing any arrows to where they are going. I think it’s beneficial to both companies if they actually come out with new products, maybe new silicon products for Intel or a new platform for Nokia, but right now it’s a good strategic partnership and that’s about it.”

Without mentioning specifics, the companies said they would work together to define a new mobile platform beyond today’s smartphones, notebooks and netbooks, “enabling the development of a variety of innovative hardware, software and mobile Internet services.” In a media call today, Anand Chandrasekher, senior vice president of Intel’s ultra-mobility group responsible for the Atom mobile processor, and Kai Öistämö, executive vice president of devices for Nokia, repeatedly emphasized that it is too early to say what products will come out of this technology collaboration or what the timing will be. 

“Let’s not get hung up on terminology here,” Öistämö said on the call. “Suffice it to say, we plan to turn our joint research into concrete action, creating a range of devices far beyond today’s smartphones, MIDs [mobile Internet devices], notebooks, netbooks -- whatever you call them.”

These future standards-based devices will combine computing and communications into a pocketable form factor. The partnership will also include collaboration in several open-source mobile Linux Moblin and Maemo software projects as well as allow Intel to acquire a Nokia HSPA/3G modem IP license for use in future projects.

Even without products announced, signing up the largest handset maker in the world is significant for Intel as it looks to ward off competition from Texas Instruments, which makes chips to run programs in mobile phones, including for Nokia, and Qualcomm, the largest communications chip maker. It’s also significant for Nokia, which dominates the US cell-phone market at the low end but is looking for new ways to penetrate high-end smartphones.

Intel has been trying to increase its presence in the mobile phone market for years now, announcing at Mobile World Congress that it intended to scale the laptop down to the smartphone. The company also announced LG as the first handset manufacturer to embed its chipset in future MIDs, its own category of smartphone-PC hybrids, at MWC. Today, Intel’s microprocessors run more than 80% of the world’s PCs, but the mobile phone market has been dominated by the lower-power ARM processor.

ARM was thought to be the most logical choice for Nokia as it seeks to make the smartphone larger and more powerful, while Intel’s Atom chip would have been the more likely candidate for a Nokia netbook. It remains to be seen which route the handset maker will take, if not both. According to McGregor, Nokia said it would not discontinue any of its efforts with the ARM camp, so the Intel relationship will just give them more options.

“They can make new bets on the software, they can make new bets on the hardware, the silicon, and one or all of them could be wrong depending on market momentum,” McGregor said. “We have to remember there are a lot of other big silicon players playing in the market, a lot of other ODMs and OEMs in this market, as well as other software vendors. That is the one fascinating thing about what’s going on today. Despite seeing industry consolidation, advancements in technology continue to offer more choices. This may lead to another set of choices, but there are still a lot of choices out there in terms of technology.”

The MID approach hasn’t worked well for Intel yet, McGregor added. Handsets have trade-offs with battery life, and Intel’s powerful Atom has a reputation for running battery life down. Likewise, McGregor said that Nokia’s high-end devices still lack in the areas of Internet and computing. In his opinion, the best-case product scenario would be for the companies to develop handheld devices that really offer a richer computing experience.

“If they actually come out with a pocketable device that offers that a rich entertainment experience, that would be phenomenal,” McGregor said, noting that the iPhone and Palm Pre are already getting close to this ideal but could use the larger screens that Intel and Nokia can offer.

“It’s an ecosystem that is constantly changing, and we’ll see what comes of it,” he said. “If anything else, hopefully this enables Nokia to come out with some very unique devices to compete in an ever-increasingly competitive environment, and maybe this finally gives Intel a foothold into the communications market that they’ve so dearly wanted but haven’t been able to accomplish.”