Nokia ditches Symbian for Windows Phone 7

In London this morning, Nokia CEO Stephen Elop and Microsoft CEO Steve Ballmer jointly announced a strategic partnership between the two companies that will see Windows Phone 7 become Nokia’s “primary smartphone platform”. Elop said that the partnership would “disrupt the current trajectory of smartphone ecosystems” and said the two companies’ smartphone strategies were “highly complementary”.

Ballmer added that the two companies will collaborate closely and that they are already working on the first devices. He revealed that he’d first met with Elop to discuss a possible alliance in November last year. Elop said that Nokia had also been in talks with Google as a possible partner, but he claimed that Nokia would have had difficulty differentiating its products from competing smartphones in the Android market. Before becoming Nokia CEO, late last year, Elop worked for Microsoft as the head of its Business Division.

The deal will not only involve the operating system, but also ancillary services and brands. Elop explained that Nokia’s contributions to the alliance would be its strong brand, its expertise in mapping software and the company’s global reach, plus its existing app store, while Microsoft would contribute its operating system as well as strong brands such as Bing, Office and Xbox. No details were given as to how the companies’ separate app stores, and especially Nokia’s Ovi portal, would be reconciled.

The news spells doom for Nokia’s current operating system, Symbian, although Elop said that there are still 200m Symbian devices in use and he claimed that 150m more would be shipped. Nokia’s MeeGo operating system – a merger between its own Linux-based Maemo OS and Intel’s mobile Linux, Moblin – would still be developed “as an opportunity to learn… [the MeeGo team] will explore future devices [in] a longer-term plan to anticipate the next disruption in the mobile ecosystem”. He added that the first MeeGo device will ship later this year.

Nokia is hoping that the deal with give it a huge boost in the North American market, where it has traditionally been weak. He added that the company was “absolutely focused on the US market”. Elop himself is Canadian, and the first non-Finn to be CEO of Nokia.

During the press conference, the word “innovation” was repeated again and again, but in our view, this deal marks a safe and conservative path for both companies. Windows Phone 7’s growth will rely on the traditional Microsoft tactics of tying mobile customers into its wider product portfolio, relying on strong integration between its products to lock customers in. Much like Apple’s walled garden, this creates a seamless user experience but actually reduces innovation.

Meanwhile, Nokia can piggy-back on Microsoft’s OS and can reduce its reliance on R&D – the company admitted that a reduction in its R&D spend was part of its plan – although it will still be able to hedge its bets by continuing the development of MeeGo. However it’s hard to see where the market for the upcoming MeeGo device will be, unless Nokia uses it exclusively to drive a new tablet strategy.

Both CEOs were keen to stress that many details remained to be worked out, and more announcements would be forthcoming in the coming months. Many questions still remain: such as how will Symbian developers and other handset manufacturers react, and does Nokia really have a chance of recouping its investment in its Ovi portal and associated software, given Microsoft’s pre-eminence as a software company.