Nokia Oyj, the world's biggest maker of mobile phones, said it's forming a software partnership with Microsoft Corp, betting that together the two companies can challenge Google Inc and Apple Inc.
Nokia shares fell as much as 12% in Helsinki, the biggest drop in a almost 10 months, after it's plan to make Microsoft's Windows its primary software was seen as a sign of the extent of its troubles taking on Apple's iOS and Google's Android platforms.
The move may be the biggest strategy shift by Nokia since the one-time wood pulp company began making mobile phones in the 1980s. Nokia was struggling to revive after its piece of the fast growing smartphone market plunged to 27.1% in the last quarter from 50.8% when Apple shipped its iPhone in June 2007, according to Gartner Inc. Nokia has lost more than 60% of its market value that time.
Microsoft, whose Windows Mobile Software licences were doubling annually before iPhone hit the market, has likewise struggled to win acceptance for its revamped Windows Phone 7 OS.
The deal gives Microsoft access to one of the world's largest mobile distribution networks. Under the plan unveiled, Nokia and Microsoft will combine assets and jointly develop and market mobile products, As the Microsoft CEO said that the partnership will "drive innovation". According to the deal, Nokia's Maps product will become a core part of Microsoft's service, while Microsoft's development tools will create applications for Nokia Windows Phones
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Nokia plans to "substantially reduce" its research and development budget. At 5.9 billion euros ($8.1 billion), Nokia's R&D spending is more than four times that of Apple's. Nokia said there will be "significant reductions" in Nokia jobs.
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