Last week, the Twitterverse was all-agog about rumors of a pending Microsoft and Nokia deal for Windows Phone to become the only operating system for Nokia smartphones going forward.

As a fan of Windows Phone 7 and the Windows Phone platform, I was hopeful that the rumors would come true.

On Friday, February 11, 2011, Nokia and Microsoft confirmed that they had indeed consummated a deal. Nokia’s identical press release is here.

Their agreement, as we know it
From the press release linked above, a few highlights:

Nokia and Microsoft intend to jointly create market-leading mobile products and services designed to offer consumers, operators and developers unrivalled choice and opportunity. As each company would focus on its core competencies, the partnership would create the opportunity for rapid time to market execution. Additionally, Nokia and Microsoft plan to work together to integrate key assets and create completely new service offerings, while extending established products and services to new markets.

Under the proposed partnership:

• Nokia would adopt Windows Phone as its principal smartphone strategy,
• Nokia, exclusively of all other Windows Phone licensees, would be able to extend the Windows Phone platform donating to the platform ‘for the greater good’. However, in some instances, Nokia would be allowed to keep innovations on the platform to itself.
• Nokia’s market-leading optics innovations were specifically mentioned as improvements.
• Nokia’s expertise on hardware design, language support is going to be counted upon to bring Windows Phone to a larger range of price points, market segments and geographies.
• Nokia and Microsoft would closely collaborate on joint marketing initiatives.
• Nokia and Microsoft would also closely collaborate on a shared development roadmap to align on the future evolution of mobile products.
• Bing would power Nokia’s search services across Nokia devices and services, giving customers access to Bing’s next generation search capabilities.
• Microsoft adCenter would provide search advertising services on Nokia’s line of devices and services.
• Nokia Maps would be a core part of Microsoft’s mapping services. Maps would be integrated with Microsoft’s Bing search engine and adCenter advertising platform to form a unique local search and advertising experience.
• Nokia’s extensive operator billing agreements would make it easier for consumers to purchase Nokia Windows Phone services in countries where credit-card use is low.
• Microsoft development tools would be used to create applications to run on Nokia Windows Phones, allowing developers to easily leverage the ecosystem’s global reach.
• Nokia’s content and application store would be integrated with Microsoft Marketplace for a more compelling consumer experience.

The next two infographics help visualize the above:

Not to be left out, there was the obligatory ‘open letter’ from both CEOs on the agreement. The salient points are below.

“Today, developers, operators and consumers want compelling mobile products, which include not only the device, but the software, services, applications and customer support that make a great experience,”  Stephen Elop, Nokia President and CEO, said at a joint news conference in London. “Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race.”

“I am excited about this partnership with Nokia,” said Steven A. Ballmer, Microsoft CEO. “Ecosystems thrive when fueled by speed, innovation and scale. The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute.”

It was extremely gratifying when I saw (Nokia CEO) Stephen Elop’s tweet responding to an extremely childish and, if I may be so frank, incredibly stupid tweet from a Googligan where he denigrated the agreement as a mating of two turkeys.

The response showed maturity, thoughtfulness, and that Elop was ready to fight to bring his company back into relevance.

I like that.

What do I think of this?
I think this is a mungo huge win for Microsoft. It is also a huge win for Nokia.

For Microsoft, the benefits are immediate, and evident. The fledgling Windows Phone platform gets adopted as the primary smartphone platform by the world’s largest handset manufacturer. It gets distribution on the scale that must only have been discussed in cones of silence by the VITOs* at Microsoft. It gets a dedicated partner that is invested in, and totally committed to the platform, and will throw all eggs into the basket (frying pan?). * VITO: Very Important Top Officer

Moreover, since mobiles are certainly the future, can you imagine the incredible amount of search data that Microsoft’s Bing is going to be able to analyze, and utilize to improve itself? The network effects of this collaboration will definitely benefit both companies, as the excellent Microsoft developer tools, and extremely capable developers see an burgeoning market for their products.

For Nokia, the immediate benefit is a return from the brink…of irrelevance! This move instantly transforms Nokia from a sleepy, hidebound, former market leader – in perception only, since they still lead in smartphone sales – to a front-runner. In fact, Elop was right when he declared the smartphone wars to be a new, 3-horse race.

It is.

If you look at the current landscape, you have

1. Microsoft’s Windows Phone 7
2. Apple’s iOS
3. Google’s Android
4. Research in Motion’s Blackberry** ** Blackberry OS: I may be alone, but I regard the Blackberry OS as a quasi-smartphone OS.
5. Nokia’s Symbian
6. HP’s WebOS, and
7. The Nokia/Intel Meego

By all indications, Meego isn’t cutting it, and Symbian has taken a 10-percentage point global market share nosedive in an expanding category. Blackberry and iOS remain proprietary, and by all indications, WebOS would also remain so.

What options were left if a move was to be made with immediacy? Windows Phone 7 and Android.

As mentioned in this article here, Nokia correctly decided early not to go ahead with Android, as it would lead to a very drastic commoditization of Nokia hardware. Furthermore, it is rumored that the desired ability to extensively customize that OS was denied to Nokia.

Microsoft not only allows that, from the statements that have been made, but also wisely is going to allow Nokia the ability to drive the Windows Phone platform down to lower price points, possibly even as the operating system for Nokia’s value phone, a prediction I made in tweets when Windows Phone 7 was released and reiterated last week when these rumors started to permeate everyone’s consciousness.

Furthermore, as the use of mobiles for e-commerce explodes in developing countries, which also, have incredible population growth, I see Nokia as uniquely positioned to use it’s value phone dominance to turn the yet nascent smartphone space into a greenfield. That would be a direct benefit of being able to bring Windows Phone down-market, stripping out the products that are not needed by the target market.

An obvious loser
The very obvious loser here is HTC. They rode Windows Mobile to prominence, and got burned by Microsoft's lack of understanding of phone in general: the phone is about the most intimate device we have. It almost always resides with reach, even snagging a place on the bedside tables. Capture our hearts with that, and we’d sneak it into the enterprise somehow. In face, I would hazard a guess that a majority of phone owners would leave their laptops in the trunk of the car, but trudge work to their garages to retrieve a phone if it is left there.

As a result, HTC edged it’s bets, creating a new UI, and getting rolling with Android devices. I currently use the excellent HTC HD7 (Windows Phone 7), with my backup being the HTC HD2 (Windows Mobile Vista, aka Windows Mobile 6.5).

It loses it place with this new development, probably as a result of it’s vacillating about whether to go all in with Windows Phone.

Still, it is also good for HTC, as Nokia’s expected delightful designs should propel them to make better Windows Phones.

What about marketing?
Lost in all of this, and reinforced by my TV watching today during the NBA basketball games and a Burn Notice marathon on USA network, was the near absolute and total lack of marketing by these two partners.

For marketing, and marketing alone, Microsoft and Nokia do deserve to be called turkeys.

Marketing for smartphones, which seemed to have come alive at Microsoft leading up to, and after the launch of Windows Phone 7, has vanished!

While I am not an avid TV watcher, I cannot recall the last time I saw a Windows Phone ad on the telly. This, despite statements that Microsoft is determined to spend upwards of $500 million USD promote the platform. Please don’t ask me of the last time I saw a Nokia commercial. The next Nokia TV, radio, or general newspaper/magazine ad I see would probably be my first one!

To contrast that, the iPhone, iPod, and the almost-a-year-old iPad have sold a gazillion copies. Yet, I see ads for them everywhere, even on the oldies-only TV channel where I enjoy my daily dose of The Rockford Files! More than just pushing the product, the iPad ads showcase several usage scenarios that, while maybe no longer unique to the iPad and are available on Windows Phone 7, are not demonstrated in any way for Windows Phone. How could they be? There are no ads!

In the past, I have excoriated Microsoft for its fascination with Hollywood blockbuster-style marketing. You know, where leading up to a release of a movie, and for four days after the same release, you are inundated with ads about the movie. On the fifth day after the release, all mention of the movie in commercials cease, as it some Mensa in Hollywood believes that the carpet-bombing of the ads would be persistent in moviegoers minds. The movies that have shown staying power have been the movies that augment word-of-mouth – positive or negative – with an ongoing ad campaign. James Cameron’s Avatar comes immediately to mind…

I sincerely hope that an offspring of this paring, is a realization that the current marketing strategies, if left alone, would lead to total failure.

Hopefully, we would never get that hoped for (by Microsoft/Nokia haters) movie, Clueless Simultaneously in Redmond & Espoo!

That would truly suck.

Can you even buy a Windows Phone today?
Another problem befalling Microsoft that could lead to the failure of this alliance is the inability of Microsoft to close the loop on product releases. Microsoft’s traditional reliance on partners to bring products to retail markets has blinded it to the problems with Windows Phone 7 today: you just cannot buy a Windows Phone 7 device.

Let me explain: when Apple released the iPhone, not only did it bring all the goodies with it, but it came with a defined set of both data and voice plans from the chosen carriers. Immediately, enthusiasts were able to determine which of those plans suited them. And they purchased the phone in droves because it was easy to buy, activate, and use.

Despite all of the whining and groaning about coverage, people stayed on.

The difference between the iPhone buying experience with that of Windows Phone 7 cannot be greater.

• There are no Windows Phone 7-specific plans. It would have been nice to have similar plans across the Telco's, or barring that, somewhat-similar plans, reducing customer confusion.
• Some pre-announced products are still not available, in this case the Dell Venue Pro. In fact, at two Denver-area T-Mobile stores, the sales droids there insisted that there weren’t any phones like that, prompting me to show them a printout of the Microsoft Windows 7 home page proving them wrong!
• Special deals turn out not to be special when you add the numbers up. Remember the Christmas 2010-era BOGO? Buy one, get one free? You could, but only with a hefty monthly usage plan. This past weekend's 'free' offer turned out to be not-so-free, with an $80 per month minimum voice and data plan.
• Mobile Telco partners do not seem vested enough in the success of Windows Phone 7 to train their retail store staffers in actually trying to sell the product(s). In addition to item #2 above, in my less-than-scientific survey of five Denver-area AT&T and T-Mobile stores on Saturday, February 12, I was actively discouraged by the sales drones from buying a Windows Phone 7 device. When asked why, I was informed that they sucked. I then whipped out the HTC HD7 Windows Phone 7 I had on me, and asked them to replicate the actions I was performing. They couldn’t. But I shouldn’t have to do that. It shows that Microsoft isn’t either training the Telco sales droids correctly and completely, or that it isn’t incentivizing the Telco and staffers  enough – enhanced commissions, bonuses, spiffs – to steer potential customers towards Windows Phone 7.

With issues like this, how can the platform actually thrive?

Microsoft should use a chunk of that $500 million to subsidize purchasers who just want a smartphone. Getting fence-sitters on the platform should be the highest priority, with the reserved option to upsell them after an introductory period whereby those users are able to consume not only Windows Live and the other Microsoft ‘cloud’ offerings, but also those of their chosen Telco.

Conclusions
Windows Phone 7 is a fantastic product. It shows what Microsoft can do when it decides to put a little vim behind a consumer product. Such as keyboards, mice, webcams, Surface, Xbox 360, Kinect for Xbox 360, Zune, etc.

This alliance with Nokia is a gift from heaven for both parties.

If this partnership is adroitly managed, it will no doubt lead both companies back to regaining the luster they had both mislaid when they lost their way. It can lead to truly innovative products, and help steer us into a seamless realization of Microsoft’s three-screen strategy, the ‘cloud’ included.

However, if the two concerns above are not addressed, the partnership, and two great companies, will fail.