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Nokia’s share price fell 14% the day former Microsoft executive and current Nokia CEO, Stephen Elop, announced Nokia would build phones uniquely for Windows Phone 7. There are many reasons to question the benefit to Nokia of the partnership. Om Malik laid out some of these arguments in “The End of the Nokia Raj.” 

But consider the partnership with optimism for a minute. 

Windows Phone is a gaming ecosystem to be reckoned with. There are 50M XBox 360s. 30M of those households users pay $60 per year to connect to XBox Live. XBox Live is integrated into Windows Phone 7, enabling these tens of millions of gamers to play games and manipulate avatars wherever. In addition, Microsoft has been able to attract and serve casual game developers successfully on XBox Live Arcade. 

Couple this massive gaming ecosystem to Nokia’s carrier billing relationships, which makes it easy to pay for games, and we might have a gaming environment to rival Apple’s iOS. 

If Microsoft and Nokia work closely together to ensure consistent app behavior across handsets, developers may find Windows Phone 7 to be a compromise between a regimented, homogeneous iOS environment and a lawless, fragmented Android ecosystem. Microsoft’s $500M marketing budget won’t hurt, either.

Secondly, this partnership may answer the call of the unserved enterprise customer.

Save for RIM and the Droid Pro, iOS and Android smart phones cater exclusively to consumers. Microsoft and Nokia are in a unique position to challenge RIM in the enterprise. Naturally, Windows Phone 7 has the best integration with Exchange and Office. Microsoft has an army of Value Added Resellers looking to sell new products to their legions of customers. A high end mobile phone that talks seamlessly to SharePoint is a perfect fit. 

Let’s not forget, about 3M Windows Mobile Phones have been sold since launch in mid-November – about 19% the number of iPhones on a run rate basis.

Setting aside the massive challenges presented by enterprise partnerships, there is significant potential for Nokia and Microsoft to win share and deliver products that uniquely serve certain markets. 

I’m still massively bullish on Android. But a fourth player in the market will only benefit consumers (and startups). I hope this partnership thrives.

 

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