Nokia and Intel's relationship consists of three key parts: Intel licensing Nokia's 3G HSPA cellular technology for use with its chips; the pair collaborating on making their respective open-source implementations of Linux for small devices more compatible and collaboration on future Intel architectures (IA) for mobile devices.

The pairing is compelling and will be a big boost for both Nokia and Intel as they hash out a game plan, said Jack Gold, principal and founder of J.Gold Associates, a Northborough, Mass.-based mobility research firm.

In a research note, Gold said Intel in the past has had trouble building competitive cellular radio chips, for example its XScale line which it divested to Marvel. Nokia, however, has "compelling intellectual property" in radio technology, which has led the Finnish mobile device maker to become the world's largest manufacturer of cellular phones.

"Intel rightly understands that it needs to be able to offer a competitive cellular modem to fill in its communications product offerings," Gold said. "This is critical in the netbook and mobile Internet device (MID) space where it has targeted its Atom processors, and where it hopes to eventually make a play for smartphones as well with future, lower powered models of Atom."

Gold noted that 3G HSPA cellular chip competence will be critical, and while Intel wouldn't specify which chip family it would announce products for or when, Gold said he expects the first products using the new capability will be Atom-based systems, the first of which will hit the market around mid-2010. And while Intel currently doesn't have any plans around 4G cellular technologies, like LTE and WiMax, Nokia has strong intellectual property in those areas, eliminating the need for Intel to rely on other suppliers, and in some cases competitors, for chips.

Additionally, the Intel and Nokia partnership gives Nokia input on the long term evolution of the IA infrastructure as it relates to wireless communications. Currently, Nokia depends on the ARM chip architecture for most of its smartphones and Internet tablets, Gold said, adding that Nokia also understands that ARM falls short as Nokia eyes the netbook and mobile Internet device markets. Adding Intel to the fold gives Nokia a say in the design of Atom chips to help it break out of smartphones and into new wireless devices.

Additionally, Gold noted, from an operating system level the partnership is a key advantage to both companies, which both have competing open-source solutions built on a Linux kernel but non-compatible user interfaces. The partnership will help build more compatibility into Intel's Moblin operating system and Nokia's Maemo, which powers its Internet tablets. A compatible user interface lets application providers build an app that runs on both Linux distributions. Gold said Nokia's expertise in wireless requirements for an operating system and user interface, tied in with Intel's knack at optimizing software for specific chips will lead to more compelling and better running systems. It could also act as a strong competitor to the open-source Google Android operating system, which is expected to hit netbooks and mobile Internet devices in the near future.

Overall, the new Intel-Nokia alliance is a "win-win" for both companies, but it is also a win for the market, Gold said.

"This strategic relationship is a win-win for both Intel and Nokia. It is also a win for the marketplace, as it should allow more capable wireless devices to make their way to market in the next couple of years. And a more converged Linux landscape in the MID and netbook market will allow the market to expand more quickly as fewer incompatibilities in applications and peripherals will exist," Gold said. "We expect to see further relationships develop between Intel and other major stakeholders in significant niche areas of the market where Intel does not have the IP it needs. The days of 'do it all ourselves' are over for Intel. And Nokia also understands it needs more partnerships to stay ahead of its competitors."