Nokia Leaps to Microsoft, Stock Falls

NEW YORK, (TheStreet) -- Nokia (NOK) jumped onto the Microsoft (MSFT) Windows platform. Investors did some jumping as well -- out the exits.

Opting for a pragmatic solution over the popular choice, Nokia snubbed Google's (GOOG) Android operating system and chose to make smartphones powered by Microsoft's Windows Phone 7 software, according to Bloomberg and other news outlets.

The news comes a day ahead of Nokia's analysts' day event in London, where CEO Stephen Elop is expected to outline a turnaround strategy for the sputtering phone giant. Elop's revitalization plan will attempt to pull Nokia out of its Finnish isolation and make its phones more competitive.

Wall Street had favored the popular Android system as the quick and more crowd-pleasing option. Instead, Nokia's alignment with Microsoft ties it to a partner that has deep pockets but very limited success with its Windows phones.

Nokia shares had jumped 4% Wednesday on enthusiasm over a hard-charging letter Elop sent to employees filled with references to leaping off a burning North Sea oil rig.

However, Nokia's decision to leap aboard the Windows Phone 7 platform knocked the stock down 5% Thursday.

Elop, a former Microsoft executive, may have been chosen by Nokia's board to make this sort of sweeping strategic decision that would be unthinkable to Finnish management.

Android's popularity may have worked against it in Nokia's plan. The vast numbers of Android phones leave Nokia with very little room to stand out with its own models.

Though one Google executive described the decision with the statement, "two turkeys do not make an eagle," Nokia's phone manufacturing skills actually line up well with Microsoft's software strength. Together the two companies could potentially create a viable third option in smartphone market dominated by Apple and Google's Android.

Unfortunately for Nokia fans, it could take a year or more for Nokia to develop compelling Windows 7 phones.

Elop will no doubt spend a big portion of the day Friday explaining Nokia's interim approach to smartphones to analysts while Microsoft phones are in development.

--Written by Scott Moritz in New York.



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