Helsinki, Finland — Nokia, the world’s biggest mobile phone maker, has taken a dive into the unknown on Friday, forging a strategic partnership with U.S. software monopolist Microsoft in a bid to build an iPhone killer, in a desperate attempt to take on Google and Apple in the fast-growing smartphone market.
Announcing the strategic alliance, Nokia CEO Stephen Elop said in a London conference that Nokia plans to adjust leadership and make organizational change. There will be considerable downsizing in employment in various locations around the world and that too will affect Finland.
The announcement sent wave of discontent, and staff stage walkout at Finnish firm’s headquarters after it announces mobile phones will use Windows system. Besides, investors were not convinced by Nokia’s announcement and the company’s shares tumbled more than 11%.
Nokia is touting its Microsoft alliance on its Web page. (Credit: Nokia)
As part of the deal, disclosed in London by Elop and Steve Ballmer of Microsoft, Nokia will adopt Windows Phone 7 as its default operating system, along with its current operating system, Symbian, in a dramatic attempt to compete in what Elop called “the war of ecosystems” against rivals’ offerings.
Moreover, adopting Microsoft’s Windows Phone as the operating system for smartphones, is a bold initiative designed to lift both companies’ fortunes in the mobile market. “It is now a three-horse race,” Elop said.
However, the companies cautioned that they have yet to hammer out a definitive agreement. It means that probably by mid-2012 Nokia will phase out the Symbian OS, which was developed by British firm Psion and made Nokia the world’s leading smartphone vendor.
Nokia chief executive Stephen Elop, left, and Microsoft boss Steve Ballmer announce that the Finnish firm will use the Windows mobile system in its handsets. Photograph: Luke Macgregor/Reuters
Nokia’s new strategy will have a significant impact on the company’s operation and employment, especially on local jobs in Finland. However, the alliance will also see Nokia boss Elop cut a swathe through layers of officialdom inside the company, which could see thousands of staff made redundant in the coming years and large parts of the research and development effort passed over to Microsoft.
Elop stated that Nokia had preliminary discussion with the Finnish government about the planned structural change and reduction in research and development spending. However, he did not reveal any details on how many jobs will be cut.
According to Finnish media reports, Minister for Economic Affairs Mauri Pekkarinen said on Friday that Nokia’s proposed organizational changes could be a threat to large numbers of jobs in research and development in Finland. He said that this would be the biggest process of organizational change that Finland has ever seen in the new technology sector, and the Finnish government has pledged to help soften the blow caused by job cuts.
Pekkarinen stated that Nokia executives have promised all essential technical and financial resources to the restructuring process, and the goal is to keep the transition as painless as possible, and help impacted employees to find new careers. He said that he firmly believes Nokia will continue to stay in Finland.
For Nokia, the move empowers it access to a state-of-the art smartphone OS and frees it from having to spend billions of dollars of its own money to keep pace with cash-rich rivals Apple and Google in the phone wars. Among other things, Windows Phone 7 features Smart Tiles that push e-mails, IMs, and social network updates to the forefront of the user interface, and it ties directly into Microsoft Office and Exchange.
Furthermore, Nokia will also use Microsoft’s search engine Bing to power searches, and its AdCenter platform will provide search advertising services on Nokia devices.
The Finnish mobile maker’s mapping software, meanwhile, will become a “core part” of Microsoft’s mapping services, integrated into the Bing search engine and AdCenter advertising platform to deliver local search results.
In addition, Nokia’s content and application store will be integrated with Microsoft Marketplace.
“I am excited about this partnership with Nokia,” said Microsoft CEO Steve Ballmer, at a news conference in London. “Ecosystems thrive when fueled by speed, innovation, and scale. The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute.”
Nokia CEO Elop said the arrangement would add a host of new tools and services to his company’s sleek handsets.
“Today, developers, operators, and consumers want compelling mobile products, which include not only the device, but the software, services, applications, and customer support that make a great experience,” said Elop.
The alliance with Microsoft is intended at helping both companies claw back ground lost to Google’s Android software and Apple’s iPhone at the high end of the market.
Ballmer said Windows Phone 7 had received great reviews and feedback, and “strong engagement” from developers had seen more than 8,000 application developed for its Marketplace.
After Nokia announced the strategic cooperation with Microsoft, its share price tumbled as much as 14 percent in Helsinki Stock Exchange.
Nokia’s restructuring is set to take effect April 1.