LONDON — Nokia, the struggling world leader in mobile phones, on Friday said it would discard its own cellphone operating system for software made by Microsoft, in an alliance of market leaders designed to shore up their halting efforts in smartphones. The announcement by Stephen Elop, the former Microsoft executive hired by Nokia in September as the company’s first non-Finnish chief executive, was a dramatic admission of failure by Nokia, the proud world leader in handsets that helped define the mobile age in its infancy.
At the same time, the alliance, made ahead of a Nokia investors’ conference in London, is a bold gamble, a perhaps last-ditch effort for both Nokia and Microsoft, which dominates the desktop and laptop software market, to gain a lasting foothold in the booming smartphone business.
Mobile devices like smartphones — Internet enabled cellphones — this year are expected to surpass desktop and laptop computers as the main way to access the Internet, a seismic change that is rewriting the rules for software makers and the Web businesses that depend on Internet contact.
“Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward,” Mr. Elop, a Canadian who led Microsoft’s business software division before moving to Nokia, said in a statement. “Today, we are accelerating that change through a new path, aimed at regaining our smartphone leadership, reinforcing our mobile device platform and realizing our investments in the future.”
Mr. Elop described the relationship with Microsoft as a broad strategic alliance that would extend beyond using Microsoft Phone software on Nokia smartphones. Nokia’s mapping software, Nokia Maps, will also be used in Microsoft's Bing search engine, Mr. Elop said. Nokia’s Ovi software services business, a major effort by the company to match Apple, will disappear and become part of Microsoft’s Marketplace application and services platform.
Nokia’s one-year collaboration with the chip maker Intel called MeeGo, to produce a new generation of Nokia smartphones, will become a long-term open-source project designed to develop new kinds of devices, Mr. Elop said. The collaboration had failed to produce a cellphone in its first year. Mr. Elop said Nokia planned to introduce a MeeGo model this year.
In a related move, Mr. Elop announced the departure of a Nokia board member Alberto Torres, the executive vice president responsible for MeeGo. He also elevated Jerri DeVard, an American former manager at Verizon and Microsoft, to the executive board. Mr. Elop had hired Ms. DeVard last month as Nokia’s new chief marketing officer.
In his remarks, the new Nokia chief executive made it clear that the future for Nokia laid with Microsoft. Symbian, Nokia’s own operating system that has been largely blamed for the company’s declining market share, will continue as Nokia services the 200 million Symbian cellphones in use around the world. Mr. Elop said Symbian would become a franchise business, and Nokia expected to sell another 150 million mobile phones before halting development.
One analyst said the radical changes, while risky, were long overdue. But Microsoft, which has only a 2 percent share of the global handset operating system market, may draw the bigger benefits.
“It’s a big win for Microsoft today,” said Pete Cunningham, an analyst with Canalys, a research firm in Reading, England. “Windows Phone 7 is no one’s priority. But now Microsoft has a leading vendor committed to use the platform. For Nokia, the big question is how quickly can the company execute on this. That has been one of the major issues.”
Nokia’s share of the global handset market, once above 50 percent, is now falling rapidly as its rivals close in. According to Gartner, a research firm, Nokia’s global share fell to 29 percent in 2010 from 36 percent a year earlier as Apple and R.I.M. both posted gains.
The Microsoft chief executive, Steve Ballmer, was expected to join Mr. Elop at the conference for investors later Friday.
