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Microsoft-Nokia Phone Deal On Track

Nokia-branded smartphones running Windows Phone 7 should hit stores by next year as alliance takes shape.

Efforts by Microsoft and Nokia to hammer out the details of a mobile technology alliance are well underway and should lead to Windows Phone 7 software on Nokia smartphones by 2012, a senior Nokia executive said.

"Negotiations have progressed very well. They will be concluded well on schedule," Kai Oistamo, head of corporate development at Nokia, told Reuters on Monday.

Microsoft and Nokia announced Feb. 11 that they'd reached a preliminary agreement under which Windows Phone 7 will become the default operating system on Nokia devices, but said many of the details of the plan had yet to be worked out. It's expected that a definitive deal will be worked out by the end of April.

Microsoft will rely on Nokia's worldwide distribution channels to boost Windows Phone 7's market presence. The company has released few details about sales of devices based on the OS, leading many analysts to conclude that Windows Phone 7 isn't selling well.

AT&T, T-Mobile, and Sprint currently offer Windows Phone 7 phones in the U.S. from manufacturers HTC, Samsung, Dell, and LG.

Nokia, now headed up by former Microsoft exec Stephen Elop, has for its part concluded that farming out OS development to Redmond is the only way it can stay competitive with cash-rich rivals like Apple and Google while keeping a lid on R&D costs.

At least one market watcher thinks the plan will yield big dividends for both companies.

IDC predicts Windows Phone 7's share of the global smartphone OS market will jump from 5.5% in the current year to 67.1% in 2015, making it the number two player in the market behind Google Android. IDC expects Android's share to grow from 39.5% this year to 45.4% by 2015. It also expects Apple's iOS, which powers the iPhone, to see its share increase from 15.7% to 18.8% over the same period.

"Up until the launch of Windows Phone 7 last year, Microsoft had steadily lost market share while other operating systems have brought forth new and appealing features," said IDC senior research analyst Ramon Llamas.

"The new alliance brings together Nokia's hardware capabilities and Windows Phone's differentiated platform." Llamas said he expects the first Nokia-branded Windows Phone 7 devices to hit stores next year.

Regardless of manufacturer, all Windows Phone 7 devices use Microsoft's unique Live Tiles interface as a starting point. Live Tiles pushes real-time updates from e-mails, social networks, and other communications tools to the forefront of the home screen. It also boasts direct integration with Microsoft products such as Office, Zune, and Xbox Live.

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