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New mobile competition drove Nokia, Microsoft deal

New competition in the smartphone market — and not just from Research In Motion — spurred the agreement between Nokia and Microsoft.

The companies announced they will develop Microsoft Office, business communications, collaboration and device management software for Nokia's Symbian phones. They said that the agreement was designed to challenge RIM.

“Even though they've pitched this against RIM, I think it's more about Android and Apple as the new competition,” said Kitty Weldon, an analyst at Current Analysis. “There's more momentum behind the iPhone and to some extent the Palm Pre, and everyone is talking about Android as the next great thing.”

Jack Gold of J. Gold Associates also said the deal will help the companies compete. “It may ultimately blunt some of the market advantage that BlackBerry has in the enterprise, and may also thwart some of the up and comers (e.g., iPhone, Android, Pre),” he wrote in an analysis of the agreement.

Neither Microsoft nor Nokia has done particularly well in the face of the new competition. Windows Mobile has lost market share this year and Nokia recently reported declining earnings, with an expectation for its market share to remain the same as last year. The deal could give both Microsoft and Nokia more leverage against the competition. It will also give end-users more choice of phones running Microsoft programs, but might present challenges to third-party companies already offering access to those programs.

End-users, particularly business users who want access to Office products, will have more choice of phones once Nokia phones start appearing with the Microsoft software. Currently, Windows Mobile devices are the only phones with Office software, although third parties supply Office viewing and editing products for most phone platforms.

That means the deal may help Nokia attract business users, despite largely unsuccessful attempts to do so in the past. Nokia bought and then discontinued an enterprise push e-mail offering from Intellisync. It has also launched a business channel program aimed at helping resellers and operators better target enterprises and introduced families of phones aimed squarely at business users, including some that look very much like the BlackBerry.

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