Microsoft And Nokia Need Deal To Remain Relevant To Mobile Business Market

The new alliance between Microsoft and Nokia under which Nokia will integrate Microsoft's Office and other applications into its smartphones is a necessary move for both companies to remain relevant in their business market and compete against RIM's BlackBerry.

That's the conclusion of J.Gold Associates, a Northborough, Mass.-based analyst firm, in a new analysis of the partnership.

Microsoft and Nokia said on Wednesday that the two will collaborate on the design, development and marketing of mobile productivity solutions by bringing Microsoft Office Mobile and Microsoft business communications, collaboration and device management software to Nokia's Symbian smartphones.

Jack Gold, founder and principal analyst at J.Gold, wrote that the agreement comes at a time when both companies are looking for ways to remain relevant to the mobile business user, especially in the face of the popularity of BlackBerry devices.

The new agreement goes far beyond the current relationship between the two vendors, Gold wrote. Nokia is expected to start by offering Microsoft's Live Communicator on its E-Series devices next year, and then offer Microsoft Office 2010 mobile components as they become available.

The agreement also allows Nokia smartphones to be managed by Microsoft Systems Center, which is used by many businesses.

Nokia's E-class is aimed at large and medium business users, but the software is expected to also be available for lower-end smartphones as well, Gold wrote.

That business focus is important. Both Microsoft and Nokia view RIM and its BlackBerry devices as their primary business threats, and are less concerned with other popular devices such as Apple's iPhone or Google's Android, Gold wrote. "Indeed, Nokia has been losing market share to RIM, and Microsoft's Windows Mobile device market share has taken a turn for the worse lately," he wrote.

Nokia is using the new relationship to be more open and less proprietary in order to curtail the shrinking of its lead in the business smartphone market, Gold wrote. Business users have told Nokia it needs a "compelling connection" to Exchange, and the company's smartphones need better manageability, both of which lacked with Nokia's own Intellisync technology.

"All of these areas are done very well by BlackBerry and have gotten many businesses' attention," Gold wrote.

Its new Microsoft relationship also shows that Nokia is interested in exploring new relationships, including with various operating system vendors and possibly with Intel, Gold wrote. "With its desire to move upscale into higher-end devices beyond smartphones (e.g., mobile Internet devices, tablets, netbooks), Nokia is clearly looking at a variety of other OSes, especially Linux," he wrote.

Microsoft, whose Windows Mobile is currently in third or fourth place and slipping in the mobile market, knows it needs to expand that share in order to increase the revenue of its Office and Exchange products. And that can only be done by offering complete functionality of its applications on multiple platforms to remain relevant in the mobile world in the face of the popularity of BlackBerry devices, Gold wrote.

"We therefore think this partnership is both an admission by Microsoft that its previous strategy of favoring only Windows Mobile is flawed, and that moving forward it knows it must be much more universal and supportive of a majority of platforms to keep its user base from defecting to competing Web-based platforms (e.g. Google's cloud initiatives). Reduced dependence on its own mobile OS will be an aid to expanding its markets," he wrote.

Gold also wrote that business users also will benefit from the new Microsoft-Nokia relationship as they increasingly expect their mobile devices to fit in corporate environments and come with better security and manageability.

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