Nokia-Microsoft deal hurts Intel smartphone chances

Nokia and Microsoft could slow down Intel's efforts to ship Atom chips to smartphones in the short term

The deal between Nokia and Microsoft hurts Intel's plans to enter the market for smartphones, in which the company has virtually no presence, analysts said on Friday.

Nokia said Friday that it would establish a future smartphone strategy around Microsoft's Windows Phone OS and that it plans to ship only one smartphone with MeeGo, a Linux-based OS developed in collaboration with Intel.

Intel and Nokia last year at the Mobile World Congress announced they would work together to develop MeeGo for use in smartphones and tablets. At the time Intel was still developing its first low-power Atom chip for smartphones and said that the software alliance would lead to a larger opportunity to ship its chips in smartphones. With this year's Mobile World Congress opening Monday, Intel still has no presence in the smartphone market, but has said that its next chip, code-named Medfield, will help provide a beachhead in a market dominated by ARM.

Nokia's partnership with Microsoft won't work in Intel's favor, said Will Stofega, program director at IDC. Intel could have provided an operating system that was tightly integrated with the hardware, but Nokia perhaps realized MeeGo wasn't the right OS for smartphones, Stofega said.

"Everything was in the right place. But the market has changed," Stofega said.

Nokia's plans to adopt Microsoft's Windows Phone OS could directly affect Intel's efforts to ship Atom-based smartphone chips in volume, analysts said. Intel confirmed in an e-mail that Microsoft's current mobile OS, Windows Phone 7, does not work with Intel's Atom processor, and there's no effort under way to port the OS. Windows Phone 7 is currently installed in smartphones with ARM processors.

Nokia's deal with Microsoft could hurt Intel's ability to ship smartphone processors in volume and it diminishes the chip maker's opportunity to compete with ARM, said Dan Olds, principal analyst at Gabriel Consulting Group.

ARM has a big array of device makers that license its architecture, so the loss of Nokia doesn't make it easier for Intel, Olds said. Intel has been trying to push Atom chips in smartphones for a few years, but does not have much to show for all the effort, Olds said.

While the deal may affect Intel, the analysts agreed that it doesn't preclude Nokia from building an Intel phone in the future. Future Windows and Linux-based operating systems could be compatible with both ARM and x86 chips, and Nokia's agreement with Microsoft is nonexclusive, which leaves a door open for the company to adopt Intel products.

Intel is disappointed with Nokia's decision, but a smartphone with an Intel processor will ship later this year, said Suzy Ramirez, an Intel spokeswoman. She declined to provide a specific time period or the vendor that would ship the smartphone.

"Intel remains committed to MeeGo and welcome[s] Nokia's continued contribution to MeeGo open source. Since day one, our strategy has always been to provide choice when it comes to operating systems, a strategy that includes Windows, Android, and MeeGo. This is not changing," Ramirez said via e-mail.

Nokia's apparent shift in OS focus might hurt Intel's smartphone efforts, but it's not a fatal blow, said Nathan Brookwood, principal analyst at Insight 64.

"Nokia's been losing share and Microsoft never had much share, this strikes me as a move of desperation," Brookwood said.

Intel still has other alliances with smartphone makers, so the opportunities are still there, Brookwood said.

The analysts agreed that the Nokia-Microsoft deal provides some clarity on the opportunity for MeeGo, which could find use in larger mobile devices such as tablets. Intel could still use MeeGo as it tries to gain more customers in that market, which is also dominated by ARM.

"It's pretty clear MeeGo is more about more advanced, mobile computing than just smartphones," Stofega said.

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