A leading analyst is questioning whether the synergy between Microsoft and Nokia will mean success for both players in the mobile ecosystem.

The two companies have been struggling in the mobile device space in the last couple of years, with platforms such as Google?s Android and Apple?s iOS stealing the spotlight. Through this synergy, Nokia and Microsoft hope to create mobile products and services that will drive them forward in the mobile industry.

?This is a make-or-break strategy by both Microsoft and Nokia,? said David McQueen, principal analyst at Informa Telecoms & Media, London. ?Yes, the two companies are the most known brands in consumer electronics, yes they have complementary strengths and bringing these strengths together could help them create a strong ecosystem, yes both companies want to be friendly to mobile operators and are seeking to use them as the main channel to consumers.

?Yes both companies have incredible marketing budgets and resources and the combination of their efforts is likely to strengthen the image of both brands,? he said. ?All these assets could enable the two companies to change the landscape of mobile converged devices in the future.

?There is no question that this partnership will provide scale for Microsoft, which has been struggling in the mobile world since the beginning and will offer more competition, which will benefit operators with more options in terms of platforms.?

What would it mean?
Under the proposed partnership, Nokia would adopt Windows Phone 7 as its main smartphone operating system, building for the platform in areas such as imaging.

Nokia will contribute its know-how on hardware design, language support and helping to bring Windows Phone 7 to a larger range of price points, market segments and geographies.

Microsoft and Nokia will closely collaborate on marketing initiatives to aid in the future evolution of mobile products.

Bing will power search across Nokia devices and services. Microsoft adCenter will provide search advertising services on Nokia?s line of devices.

Nokia Maps would be a core part of Microsoft?s mapping services. Maps would be integrated with Microsoft?s Bing search engine and adCenter advertising platform.

Additionally, Microsoft development tools would be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem?s global reach.

Nokia?s content and application store, Ovi, would be integrated with Microsoft Marketplace for a more compelling consumer experience.

?This may not be the best move for Nokia and it is questionable how open Microsoft will be to work with,? Mr. McQueen said. ?Even if Nokia fears Google?s dominance, an open platform like Android would allow much more possibilities to Nokia.

?Also, two losers don?t make a winner, particularly given their scale and cultural differences,? he said. ?It?s hard enough for massive companies to innovate on their own much less with another massive partner with a completely different culture.

?Whether Steve Ballmer and Stephen Elop can be the white knights that the operators are looking for will depend largely on the ability for Nokia and Microsoft to execute their partnership effectively.?

Implications for carriers
For wireless carriers, the synergy, along with the new and improved Windows Phone 7 that may come out of it, is a good thing.

Carriers will be able to provide more choices for consumers in terms of handsets and more choice is always a good thing.

Nokia and Microsoft may bring on a new force in the enterprise device and services space, giving Research In Motion's BlackBerry a run for its money.

?The corridors of power within the operator community will be echoing to the cries of at last,? Mr. McQueen said. ?Vodafone, Telefonica, Deutsche Telekom and many other operator peers had all been waiting for a credible challenge to the apparent hegemony of Google and Apple in the smartphone space.

?They?ll be especially pleased by both the reference to the importance of operator billing in driving uptake of applications downloads as well as the promise of a new force in the enterprise device and services space to reduce dependency on RIM?s dominant BlackBerry platform,? he said.

?What is more, the more competition there is in the smartphone space, the greater the innovation, the better the devices that emerge and therefore the easier it is for operators to convert users to upgrading to data plans.?

However, regardless of whether or not wireless carriers view the Nokia/Microsoft synergy as positive or not, in the end, it will be consumers that determine the fate of the two companies.

For this reason, expect to see Nokia and Microsoft making bold moves in terms of their marketing strategy. 

Affects on devices
Windows Phone 7 will offer Nokia access to Microsoft software expertise and may help Nokia crack the United States market.

But, according to Mr. McQueen, the problem with Windows Phone 7 is that it currently commands high-build costs so it can only compete at the top end of the smartphone market.

?This will put pressure on the Symbian and Meego platforms until such time as cost and prices has been driven down to complete with the likes of Android in lower smartphone tiers, a key segment for Nokia,? Mr. McQueen said. ?The transition from Symbian to Microsoft will take time, and in this fast-moving sector of the handsets market, time is a scarce commodity.?

Nokia software has a different DNA than Windows Phone.

Ditching existing software based on open-source to adopt a closed environment such as Windows Phone means completely changing Nokia software. This will take time.

Implications for platforms
?The decision not to go with Android is an interesting one, with Mr. Elop citing the platform as being too commoditized, democratized and difficult to create differentiation and good margins,? Mr. McQueen said. ?By Elop saying that it is now a three-horse race just doesn?t add up ? Microsoft, Android, Apple and BlackBerry equals four.

?It will be interesting to see how Microsoft partners like HTC, Samsung and LG react to this partnership,? he said. ?Bear in mind these players walked away from Symbian because of Nokia's ambitions to control this ecosystem.

?Although Microsoft is winning a strong partner, it could lose many others, particularly in the U.S.?

Final take
Nokia President/CEO Stephen Elop and Microsoft CEO Steve Ballmer in London on Feb. 11:

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