BERLIN — Shares of Nokia, the mobile phone market leader, climbed for a fourth day on Thursday amid speculation that the company may be poised to announce a software alliance with Microsoft designed to revive its struggling U.S. smartphone business.

Nokia’s shares have risen more than 4 percent since Monday when an analyst, Adnaan Ahmad of Berenberg Bank in Hamburg, urged the Nokia chief executive — and former Microsoft executive — Stephen Elop, to form an alliance that would put Microsoft’s Phone operating system on Nokia’s advanced smartphones.

Such a move would be a break for Nokia, which historically has avoided ceding key parts of its business, like software, to outsiders.

Mr. Ahmad’s letter to Mr. Elop, which was published in The Financial Times, advised Nokia to abandon its Symbian operating system for Microsoft’s Windows Phone software. With Symbian, Nokia’s share of the global smartphone market fell to 31 percent in the fourth quarter from 40 percent a year earlier, and its profit declined 21 percent.

Microsoft and Nokia, through spokesmen, declined to comment on the speculation. But analysts who follow the companies said Mr. Elop, a Canadian who became Nokia’s first non-Finnish chief executive in September, may be preparing to announce such an alliance Feb. 11 during a speech in London to investors.

“I don’t know if this is just wishful thinking, but it could definitely be the big announcement we are expecting,” said Carolina Milanesi, an analyst at Gartner in London.

Nokia shares rose as much as 1.5 percent Thursday in trading in Helsinki. They were currently unchanged at €8.17, or $11.20.

The Finnish company, which usually briefs analysts in advance of big announcements, has been uncharacteristically tight-lipped ahead of the London event, analysts said, indicating that the company may have something major that could potentially affect the market to announce.

Also feeding the speculation were Mr. Elop’s comments to analysts on January 27.

At the time, he said Nokia was going to set individual strategies for each of its low-, mid- and high-price phone businesses, a departure from its traditional global approach. Under the new system, Mr. Elop said Nokia was open to “create and/or join other ecosystems.”

The comments from Mr. Elop are being interpreted by some as a signal that Nokia plans to drop Symbian for Windows on U.S. smartphones, one of the weakest parts of the Finnish company’s business.

Nokia was the U.S. market leader as recently as 2002, but has since ceded almost all of its market share in the world’s largest mobile phone market to Samsung, Apple, Research in Motion, HTC and LG. In the third quarter, Nokia’s U.S. market share was just 2 percent, according to Strategy Analytics, a research firm based in Boston.

Like Nokia, Microsoft has also struggled in the smartphone segment.

Windows Phone software powered only 3 percent of smartphones in the fourth quarter, trailing Android, Symbian, Apple and R.I.M., which makes the Blackberry, according to Canalys, a research firm in Reading, England.

Nokia, which sold 450 million phones in 2010, would be a powerful channel for Windows, said Pete Cunningham, an analyst at Canalys. For Nokia, Microsoft would be a strong domestic ally, helping it to crack the U.S. market.

“I can see how this could benefit both companies,” Mr. Cunningham said.

Nokia and Microsoft have had a limited cooperation in phones over several years under which Nokia has licensed Microsoft applications like Windows Office and Exchange Active Sync software on some Nokia E-Series smartphones.

Microsoft’s search engine, Bing, also uses data provided by Navteq, an Illinois company which Nokia bought for $8.1 billion in 2007. As part of a possible alliance, Nokia could conceivably agree to make Bing the default search engine on Nokia cellphones.

But while such a high-profile alliance between respective market leaders would be closely watched, there is no certainty the cooperation would ultimately benefit either.

“There is no guarantee this is going to be a successful alignment,” Ms. Milanesi, the Gartner analyst, said. “Windows Phone 7 has been disappointing and Microsoft is not sexy to the consumer from a mobile phone perspective.”

I can see the attractiveness of this on the surface – two underdogs getting-together to fight the incumbents, but unless Nokia can avoid becoming just another OS licensee, this would be very bad for Nokias long-term position.

If they merely license Windows Phone OS, how can they differentiate themselves in the market so that customers buy a Nokia handset over an HTC? By producing some attractive widgets or a nice weather app? They lose control over the software eco-system and delivery of the end-to-end service, and get stuck in an endless race to the bottom with other licensees. That’s partly why HP bought Palm – it gave them a modern OS with which they can try to differentiate themselves (if they can get app developers to notice).

Hopefully Nokia see this as well.

Pin It on Pinterest

Share This