Microsoft and Nokia target corporate market

©AFP Stephen Elop of Microsoft and Kai Öistämö of Nokia during the announcement of their alliance

Microsoft and Nokia on Wednesday announced an alliance aimed at challenging Research In Motion’s lead in the corporate mobile phone market.

The Finnish mobile-phone maker is planning to use Microsoft’s Office Mobile suite of software on its smartphones – mobiles that double up as mini computers. Nokia’s E-series of phones, aimed at business users, will be the first to feature the software next year. Later it will be extended to the wider portfolio of handsets.

The partnership would help buttress Nokia’s lead in the smartphone market. The world’s largest mobile-phone maker has been losing market share to rivals, led by RIM.

“This is about creating a formidable challenge for RIM more than anyone else,” said Kai Öistämö, Nokia’s executive vice-president for devices.

Nokia saw its share of the smartphone market decline to 45 per cent in the second quarter of 2009, from 47.4 per cent a year ago, according to figures released on Wednesday by Gartner, the research firm. In the same period, RIM’s smartphone market share rose from 17.3 to 18.7 per cent.

RIM has carved out a strong position in supplying smartphones to business people, partly because the Canadian handset-maker’s BlackBerry devices have user-friendly e-mail. Microsoft’s Office Mobile, which offers e-mail, word processing, PowerPoint and spreadsheets that will synchronise easily with desktop PC systems, could boost the appeal of Nokia phones.

Microsoft’s popularity with US consumers may also help Nokia in the North American market, where it is struggling.

For Microsoft, the deal will be a way to extend its Office franchiseand ensure it remains relevant for consumers as the lines between computers and mobile phones increasingly blurs .

Microsoft’s Office suite is under threat from Google, which offers productivity software for free on the internet. Google’s Android operating system for mobile phones is also gaining traction in the market.

Microsoft has its own mobile phone operating system, Windows Mobile, but has failed to capture a leading position. Microsoft’s share of the mobile operating system market dropped to 9 per cent in the second quarter, from 12 per cent a year earlier.

Putting Office on Nokia’s rival platform appeared an admission by Microsoft that Windows Mobile was struggling, said Carolina Milanesi, analyst at Gartner, the research firm.

Stephen Elop, president of Microsoft’s business division, admitted it was a big strategic decision for them to move off Windows Mobile, but said: “From a Microsoft perspective, this is a significant strategic evolution. But let there be no doubt about it – Windows Mobile is an important strategic bet for Microsoft.”

Despite the competition between Microsoft’s Windows Mobile and Nokia’s Symbian operating system, the two companies have a track record of collaboration. Last year Microsoft and Nokia announced a deal making it easier for the Finnish company’s smartphones to access e-mail running on Microsoft’s Exchange servers.

This is also the second big computer-sector alliance Nokia has announced in the last few months. In June the Finnish company unveiled a research deal with Intel, the US computer chipmaker, aimed at developing product bridging the gap between computer and phone. Nokia have also hinted it would like to develop a netbook, or small, low-powered laptop computer.

“It could be laying the groundwork for a deeper transformation of the business to something more computer-like,” said Ben Wood, analyst at CCS Insight, the technology consultancy.

News of the deal came as a US federal court ruled that Microsoft would have to pay more than $290m in damages to Canadian software firm i4i for infringing a patent. The Toronto-based company claimed Microsoft Word and the Vista operating system violated one of its patents.