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Embattled mobile phone firm Nokia has signed up to a "broad strategic partnership" with Microsoft in an effort to rebuild its fortunes.
Stephen Elop, Nokia's recently appointed chief executive, said Nokia will use Windows Mobile 7 as its primary smartphone platform. Elop has also shaken up the senior management team, having warned staff this week that the company was standing on a "burning platform".
"Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward," said Elop, as he announced the company's new direction.
"Today, we are accelerating that change through a new path, aimed at regaining our smartphone leadership."
Under the plan, Nokia said it would use its expertise in hardware design, imaging and mapping to improve the Windows Mobile platform. The two companies will work together on marketing, and develop a common roadmap. Bing, Microsoft's search service, will be integrated into Nokia devices.
Once an undisputed leader of the mobile industry, Nokia is now struggling to keep up with Apple's iPhone and the swarm of devices running Google's Android operating system.
Nokia said it will continue to make phones running its Symbian operating system, thus "leveraging previous investments to harvest additional value". MeeGo, its Linux-based open source mobile operating system, will also continue – but with a focus on "longer-term market exploration". Alberto Torres, who had led the development of MeeGo, is leaving Nokia.
Elop's announcement had been heavily anticipated, with many commentators expecting a tie-up with Microsoft. But shares in Nokia fell by more than 10% in early trading in Helsinki.
Analysts said there was some disappointment over Elop's new financial targets. They include growing sales faster than the market from 2013, with profit margins over 10%.
John Strand, chief executive of Strand Consulting, warned that there will be "massive layoffs" at Nokia, particularly across its research and development division.
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