Nokia could be left on hold despite smartphone tie-up with Microsoft

The two tech giants announced a strategic partnership deal on Friday in a move designed to make up lost ground on market leaders Apple's iPhone and Google's Android cellphone, along with other competitors such as Research in Motion's Blackberry, HTC, LG and Samsung.

But sceptics believe it is a gamble that could backfire. American technology expert Mark R Anderson said: "It's possible to catch up … but it almost never works."

Nokia's shares dropped almost 10 per cent after the announcement in London, but the move is likely to lead to cheaper phones running Windows Phone 7.

It followed a week of heightened speculation during which Nokia's president and chief executive, Stephen Elop, in a leaked internal memo widely circulated on the internet, compared his predicament to that of a man on a burning oil rig wondering to jump or not. Elop, recruited last September by the Finnish mobile firm from Microsoft, where he was president, said he had decided to take bold action and make that jump.

It brought a stinging tweet from Google's vice president of engineering Vic Gundotra: "Two turkeys do not make an Eagle," a reference to a Nokia quote from 2005 in relation to Siemen's then merger with BenQ.

Nokia, which still sells more smartphones than any other company, has hooked-up with Microsoft, having seen its worldwide share of the smartphone market suffer a downward spiral, falling to 28 per cent in the fourth quarter of 2010, down 10 per cent from a year earlier.

Microsoft's software powers a mere 3 per cent of smartphones, and one insider said it offered Nokia hundreds of millions of dollars worth of engineering assistance and marketing support as a sweetener to encourage it to switch from its much-criticised Symbian operating system to Windows Mobile 7.

The two believe their "complementary strengths will create a new global mobile ecosystem", said Elop at a joint news conference in London, where he claimed the combined unrivalled global reach and scale meant it was now "a three-horse race" with Apple and Google. Microsoft's chief executive Steve Ballmer said he was "excited" about the partnership. "Ecosystems thrive when fuelled by speed, innovation and scale. The partnership …provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute."

Jonathan Leggett, of mobile comparison website Top10.com, said: "Nokia needed to do something to slow its declining market share and jumping into bed with Microsoft is certainly upping its game.

"However, the smartphone market is super-competitive and although Elop proclaims it's a three-horse race, Nokia right now is the 100-1 shot struggling at the back with an almost impossible amount of ground to make up"

Leggett described Nokia's move away from its proprietary operating systems as a "seismic shift" in its business model. On a brighter note, he claimed: "It will certainly give it more of a fighting chance at the top end of the market. But the odds on triumphing against Apple and Android is still a long shot."

Analyst Neil Mawston, of Strategy Analytics, said: "In terms of expanding their distribution reach this is a huge win for Microsoft," adding that he expects Nokia's current Symbian operating platform to be phased out within two years, mostly replaced by the Windows 7 system.

The companies will also partner up on mobile advertising and mapping where Nokia Maps will become part of Microsoft's Bing search engine, and Nokia will contribute its hardware design and language support to the partnership, making the Windows phone more attractive to businesses and consumers.

However, Ben Wood, director of research at CCS Insight, said: "Nokia is no longer in control of its own destiny."