Nokia’s Stephen Elop and Microsoft’s Steve Ballmer.

FEB. 10, 2011 • Finland’s Nokia Corp., the world’s largest mobile phone maker, has partnered with Microsoft Corp. to adopt the Windows Phone 7 operating system for all of its future handsets. The rationale for the move away from Nokia’s own OS is to better compete with Apple’s iOS and Google’s Android platforms.

Impact: The mobile world has evolved to the point where the hardware is approaching commoditization as differences between models by manufacturer become less important than the supporting software infrastructure of downloadable apps.  While Apple pioneered this in mass scale with its App Store, Android is quickly catching up and both are boasting this key selling point for devices running their operating systems. While constantly evolving, DFC estimates that iOS and Android, combined, control over 50% of the worldwide smartphone market with RIM’s share down to less than 15%.  The choice of partnering with Microsoft may seem questionable given Windows Phone 7 is estimated at less than 5% of the market while Nokia’s Symbian OS still has almost one third of the market already.  But Microsoft brings with it incredible financial resources and worldwide brand recognition that, combined with Nokia’s deep experience in mobile hardware, both companies hope will deliver a compelling mobile app ecosystem that will entice consumers and developers to adopt.  Given Apple and Android’s combined lead, however, it will be an expensive effort to gain share.