Image: Stephen Elop
Markku Ulander  /  AFP - Getty Images file
Nokia CEO Stephen Elop says the Finnish firm and Microsoft will "deliver an ecosystem with unrivalled global reach and scale."
msnbc.com news services
updated 2/11/2011 12:02:57 PM ET 2011-02-11T17:02:57

Nokia and Microsoft have teamed up to take on Google and Apple in the fast-growing smart phone market.

In a major change of strategy, Nokia said it would use Windows Phone as the software platform for its smart phones as part of new chief executive Stephen Elop's overhaul of the world's biggest cell phone maker. (Msnbc.com is a joint venture between Microsoft and NBC Universal.)

The Finnish firm said Friday it would work closely with Windows Phone "innovating on top of the platform in areas such as imaging, where Nokia is a market leader."

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"Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It's now a three-horse race," Elop added.

Friday's deal marks a major breakthrough for Microsoft after years of struggling to establish itself in wireless. Its Windows Phone had a mere 2 percent market share in the last quarter.

'There is no silver bullet'
Microsoft's Windows Phone platform is widely recognized by industry experts as a leading edge technology but has not yet gained success among consumers.

"This is a partnership born out of both parties' fear of marginalization at the hands of Apple and Google but there is no silver bullet," said analyst Geoff Blaber from CCS Insight.

Nokia has rapidly lost share in the higher-margin smart phone market to Apple's iPhone, and products based on Google's Android platform, which claimed the top spot from the company last quarter.

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"This is a very frank admission that Nokia's platform strategy has failed and underlines the seriousness of Nokia's position. Such a move would have been unthinkable just 12 months ago," Blaber added.

In a bid to stem Nokia's losses, chairman Jorma Ollila brought Elop in from Microsoft last September. The 47-year-old is the first non-Finn to head the company.

Nokia said in a statement it would stick with its current management team, with only one senior executive to leave. There had been speculation of a wider cull at the company.

Nokia also said it would use Microsoft's Bing search engine across its cell phones, potentially opening up a huge market for Microsoft as it seeks to build up its challenge to Google as the world's leading search engine.

Analysts said the Finnish company, which invested billions of dollars in building up mobile Internet services under its previous CEO, had effectively admitted defeat in its services strategy by joining forces with Microsoft.

The Associated Press and Reuters contributed to this report.

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