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How Nokia and Microsoft will carve up mobile services

And poke Intel in the eye

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Nokia smartphones will be running Windows Phone, but the company is hoping to hang on to some of its service-provider identity even as Microsoft grabs the choicest morsels.

Nokia tried hard to redefine itself as a provider of services, which is what everyone wants to be these days - hardware margins are tight and most software platforms are being given away for free. Over the years, Nokia has launched a plethora of services, including PIM synchronisation, cloud storage, and its very own instant messaging service – all of which eventually got lumped together under the Ovi brand but never really gelled as a coherent offering.

Recently, the Finns started killing off some of the more esoteric offerings, such as the cloud storage service, and they farmed others out to better-equipped companies, which included dumping Ovi e-mail and messaging with Yahoo. Ovi will no-doubt continue to provide services for non-smart phones, and the 150 million Symbian handsets Nokia expects to ship during the transition, but much of the service offering will now be handed over to Redmond.

Nokia gets to keep mobile mapping, while Microsoft gets handset advertising, an area in which Nokia has never showed much interest. Nokia also gets free rein to take Google and Apple to the cleaners over mobile patents, while Microsoft gets to poke Intel in the eye one last time.

These days, it's almost possible to feel sorry for Intel, which must really hate the mobile industry. First, the company pissed money into WiMAX, which got killed off by the network operators in collusion with Qualcomm. Then Microsoft announces that desktop Windows will be ported to the ARM architecture used by every other chip manufacturer, and now, Intel's attempt to undermine Microsoft with its own mobile platform is in tatters with MeeGo redefined as a "project" by Nokia and kicked into the "longer term".

Not that Nokia has much to celebrate, with Microsoft taking some of the best services for itself as well as collecting OS royalties. Contact and calender synchronisation will inevitably end up with Redmond, on smartphones at least, as will e-mail. The Ovi store gets integrated into the Windows Marketplace. We're not sure that that means. Perhaps developers will be able to submit applications to either company, but more likely, Microsoft's store will take advantage of the operator billing that Nokia has been able to put into place.

Ovi Music could survive. Microsoft has no problem with alternative content providers as long as they integrate with the appropriate Windows Phone 7 hubs, but we've yet to hear any details on that.

Ovi Maps will be the location technology of choice, on Nokia's handsets at least. It's not clear what happens to other Windows Phone 7 manufacturers which is where things get interesting. Bing Maps is currently well integrated into the Windows Phone 7 experience, automatically linking to contact addresses and calender appointments. Bing Maps can also be utilised by third-party developers through a Silverlight control, and we have to assume the same functionality will be available on Nokia handsets using Ovi Maps instead. With a consistent interface, and Microsoft getting the advertising revenue, one has to wonder why Nokia would be so keen on providing maps anyway, other than to justify the $8bn or so the Finns spent on Navteq in 2007.

Nokia has never shown much interest in mobile advertising, which is surprising when Google spent $750 on AdMob, and Apple shelled out $275 on Quattro for its iAd platform. Even Opera managed to find $8m to buy up Ad Marvel. Nokia owns Novarra, which already optimises – and inserts advertising into – mobile browsing sessions for Vodafone UK and Yahoo, but Nokia seems happy to hand over the whole smartphone advertising business to Microsoft's adCenter.

In return Nokia gets "significant" and "substantial" amounts of marketing dollars, and a doorway into America. Like all European stars Nokia has always been desperate to make it big in America, sometimes embarrassingly so, and this deal will likely put it there, but America changes people, and the Nokia that succeeds there will not be the Nokia we remember. ®

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