Nokia Is Said to Be Near Partnership With Microsoft

Feb. 10 (Bloomberg) -- Nokia Oyj is close to announcing a software partnership with Microsoft Corp., a bet that together the two companies can better challenge Google Inc. and Apple Inc., according to a person with knowledge of the discussions.

Nokia Chief Executive Officer Stephen Elop has held talks with Microsoft CEO Steve Ballmer about putting Microsoft’s mobile operating system on Nokia phones, said the person, who asked not to be identified because the discussions were private. Elop also held talks with Google CEO Eric Schmidt about using Google’s Android software, the person said. Those discussions are unlikely to lead to an alliance, according to another person familiar with the matter.

Elop will unveil a new strategy for Nokia at an event in London tomorrow, laying out his comeback plan for the smartphone market. The partnership with Microsoft, if clinched, would be aimed at helping both companies claw back ground lost to Android and Apple’s iPhone at the high end of the market.

“Very few companies regain their leadership once they’ve lost it,” said Hakim Kriout, a fund manager at Grigsby & Associates in New York, who holds Nokia shares. “It’s a very difficult thing to do because their demise tends to originate from a combination of problems rather than one or two issues.”

Strategic Alliance?

Laurie Armstrong, a U.S. spokeswoman for Espoo, Finland- based Nokia, didn’t respond to requests for comment. Dawn Beauparlant, a spokeswoman for Redmond, Washington-based Microsoft, declined to comment. Mike Nelson, a spokesman for Google in Mountain View, California, didn’t immediately respond to a message seeking comment.

Nokia would prefer to have a strategic partnership with a software company, rather than just being one of the many companies that license Android software, one of the people said. The idea would be to wed Nokia’s market share, which is especially high in emerging markets, with Microsoft’s Internet and software know-how, the person said.

Android is licensed to dozens of companies, which use it for both smartphones and tablets. Samsung Electronics Co. and HTC Corp. are the two biggest makers of devices based on the software, according to research firm Gartner Inc.

Elop, 47, took the helm at Nokia in September after a stint as head of Microsoft’s business-software division. Taking on the competitive threats may require an overhaul of the mindset at Nokia, Elop has said. The company currently relies on a smartphone operating system called Symbian, and it’s developing another software platform with Intel Corp. called Meego.

‘Attitudinal Shift’

“We need an attitudinal shift,” Elop said last month. “We must improve the quality of our execution, accelerate the speed at which we execute, and enhance the effectiveness of our partnerships.”

Since Elop joined Nokia, its shares have risen 6.7 percent, closing yesterday in Helsinki at 8.4 euros. In the same period, Apple has advanced more than 26 percent, while Google has gained 21 percent.

Microsoft shares also have lagged behind those of rivals. The stock is little changed over the past year, hampered by struggles in mobile phones and tablets. Even though Nokia’s Symbian lost market share last year, it still accounted for 37.6 percent of smartphone sales, according to Gartner. That would potentially give Microsoft a larger beachhead in the industry.

Microsoft released an overhauled mobile operating system last year, aiming to get more phone manufacturers to adopt it. So far, the new software hasn’t sparked a turnaround. The company shipped 2 million copies of the operating system, called Windows Phone 7, last quarter, disappointing analysts.

Microsoft needs to show accelerating growth, Kevin Burden, an analyst at ABI Research, said last month. A major way to do that is to get a handset maker to put a considerable amount of effort behind a Windows device, he said.

Microsoft shares dropped 31 cents, or 1.1 percent, to $27.97 yesterday on the Nasdaq Stock Market, while Google declined $1.88 to $616.50.

Source   :    Businessweek