Mobile industry insiders say a deal under which Nokia would turn to Microsoft's new software as its go-to OS could be announced as soon as this week.
Microsoft and Nokia are said to be discussing a partnership that would see the Finnish phone maker adopt Windows Phone 7 as the primary operating system for its mobile devices in a number of markets, including the U.S.
Various media outlets are reporting that a deal could be announced as soon as this week. Microsoft and Nokia have not confirmed the talks.
Nokia remains the world's largest cell phone maker, but its market share has come under significant threat from Google Android and Apple's iPhone. Microsoft, meanwhile, is struggling to build momentum for its Windows Phone 7 platform, which debuted last November. An alliance, it's thought, could give both companies a much needed boost.
Speculation favors a scenario that would see Nokia adopt Windows Phone 7 for its higher end smartphone lineup. That would free the company from the multi-billion dollar per year commitment to research, develop, and market the open source Symbian.
Such a deal would give Microsoft an exclusive hardware partner who could boost its footprint in international markets where it currently has little presence. Nokia CEO Stephen Elop is a former Microsoft senior executive who is well-versed in Redmond's culture and operating methods. Elop is said to be contemplating a major shakeup of Nokia's top brass in an effort to reinvigorate the company.
But there's also a chance an alliance could do little to help Microsoft or Nokia in the mobile market, where they risk becoming afterthoughts amid the buzz surrounding Android and the iPhone.
Major U.S. carriers have shoved Nokia phones to the back of their warehouses in favor of offerings from Android OEMs like Samsung and HTC. As of Monday, AT&T was offering just two Nokia phones on its Web site, T-Mobile was pitching four, and Sprint had none.
"Android continues to gain by leaps and bounds, helping to drive the smartphone market," said IDC analyst Ramon Llamas, in a research note Monday. "It has become the cornerstone of multiple vendors' smartphone strategies, and has quickly become a challenger to market leader Symbian."
IDC noted that Nokia's share of the worldwide smartphone market slipped to 33.1% in the fourth quarter of 2010, down from 39% in the fourth quarter of 2009.
The carriers don't seemed to be overly enthralled with Windows Phone 7-based devices either, as many have reduced the price on those phones by 50% or more since launching them only three months ago. Microsoft recently said it has shipped more than 2 million Windows Phone 7 units, but it's unclear how many of those have actually made it into the hands of consumers.
Microsoft shares were up 1.98%, to $28.32, in afternoon trading Monday. Nokia shares were up 1.76%, to $11.24.
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