Nokia and Microsoft form partnership

Nokia has joined forces with Microsoft in an attempt to regain ground lost to the iPhone and Android-based devices.

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Rory Cellan-Jones asks Nokia's Stephen Elop and Microsoft's Steve Ballmer why they chose to form an alliance

The deal will see Nokia use the Windows phone operating system for its smartphones, the company said.

It means that Nokia's existing operating systems will be sidelined.

Speaking at the launch of the partnership, Nokia's chief executive Stephen Elop revealed that there would be "substantial" job losses as a result of the tie-up.

Nokia will remain "first and foremost...a Finnish company. Finland is our home and will remain our home," he said.

But job losses around the world, including in Finland, will be inevitable, he added.

Windows first

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Analysis

Rory Cellan-JonesTechnology correspondent, BBC News

"So Stephen Elop has pushed Nokia off that now infamous burning platform he described to staff some days ago and into the unknown.

His chosen lifebelt is Windows Phone 7, a new smartphone operating system that has won critical praise but, so far at least, only a tiny share of the market.

So Nokia is moving from an ailing system Symbian - which still has a large chunk of the market - to a fledgling which has yet to prove itself, made by a firm with a poor track record in mobile.

Why then, did Mr Elop not opt to go with Google's Android, the operating system with momentum behind it? Perhaps he feels more comfortable with the culture of Microsoft, where he worked until joining Nokia.

The cruel verdict from some is that two turkeys don't make an eagle - but you can't fault Mr Elop for his audacity. This is a huge moment which could shape the future of an industry."

Speaking about the new partnership with Microsoft, Mr Elop said that "the game has changed from a battle of devices to a war of ecosystems".

"An ecosystem with Microsoft and Nokia has unrivalled scale around the globe," he said.

Microsoft's chief executive Steve Ballmer was also present at the launch, underlining the importance of the deal to the computing giant.

"Nokia and Microsoft working together can drive innovation that is at the boundary of hardware, software and services," he said.

Microsoft's Bing will power Nokia's search services, while Nokia Maps would be a core part of Microsoft's mapping services.

The new strategy means Nokia's existing smartphone operating systems will be gradually sidelined.

Symbian, which runs on most of the company's current devices will become a "franchise platform", although the company expects to sell approximately 150 million more Symbian devices in future.

"It is a transition from Symbian to Windows phone as our primary smartphone platform," said Mr Elop.

Windows may not be the exclusive operating system for Nokia tablets though.

Mr Elop was at Microsoft before joining Nokia

"We reserve the right to introduce tablets using other platforms, including ones we may be working on internally," he said.

There was no specific announcement about when the first Windows-powered Nokia phone will be available.

Mr Elop revealed that the firm did consider a tie-up with Google's Android operating system.

"We spent time with our colleagues at Google and explored the Google ecosystem but we felt we would have difficulty differentiating within that ecosystem," he said.

It was also revealed that talks with Microsoft only began in November, illustrating how quickly the deal has been pushed through.

Future clashes

The move away from Symbian is a brave decision for Nokia, according to experts.

"This is a clear admission that Nokia's own-platform strategy has faltered," said Ben Wood, an analyst with research firm CCS: Insight.

"Microsoft is the big winner in this deal, but there are no silver bullets for either company given the strength of iPhone and Google's Android," he added.

Nokia's share of the smartphone market fell from 38% to 28% in 2010, according to monitoring firm IDC.

Nokia's upcoming Meego operating system will also be sidelined.

According to the company statement: "MeeGo will place increased emphasis on longer-term market exploration of next-generation devices."

The MeeGo platform was expected to form the core of Nokia's future smartphone and tablet strategy.

The company says it still plans to ship one Meego device by the end of 2011.

For Magnus Rehle, the Nordic managing director of research firm Greenwich Consulting, Nokia may have difficulty juggling its three operating systems: Windows, Symbian and MeeGo.

"Three platforms is a lot to work with. I'm not sure there is room for so many platforms," he said.

And, as with any tie-up, there could be clashes between the two firms, he said.

Earlier this week Nokia chief executive Stephen Elop sent a memo to staff warning that the company was in crisis.

The memo, published first by technology website Engadget, said that the mobile giant was standing on a "burning platform".

"Elop has to convince the best people to stay and some people will inevitably be jumping off the burning platform," said Mr Rehle.

The partnership and more to the point it's announcement prompted a walk out of software developers at Nokias Oulu and Tampere offices