Microsoft Snuggles Its Frenemy

Nokia (NYSE: NOK  ) and Microsoft (Nasdaq: MSFT  ) need to get a room.

On Monday, Mr. Softy announced OneApp, a lightweight application platform that allows feature phones common to emerging markets to run sophisticated smartphone software. You know who's really good at making low-cost feature phones for emerging markets? Here's a hint: It rhymes with "shmokia."

Naturally, Nokia already has several handsets that support OneApp. The deals are now piling up between these two. Microsoft is planning a version of its Office Mobile suite for Nokia's Symbian mobile OS, and Nokia will use Windows 7 for its new Booklet 3G netbook. OneApp is just another way for these so-called "frenemies" to cooperate against common enemies, Apple (Nasdaq: AAPL  ) and Research In Motion (Nasdaq: RIMM  ) specifically.

Smartphones are increasingly stealing sales from feature phone makers. Gartner says that overall handset sales fell more than 6% in the second quarter, even as smartphone sales rose 27%.

Nokia isn't the only one unhappy about this. Samsung, Motorola, and Sony Ericsson, a joint venture of Sony (NYSE: SNE  ) and Ericsson (Nasdaq: ERIC  ) , all stand to lose revenue if feature phone sales keep falling.

North America is leading the revolution thanks to the iPhone, but emerging markets such as India and China can't be far behind. China Mobile (NYSE: CHL  ) is planning a series of smartphones based on the Android OS.

Nokia, meanwhile, has an interest in graduating its customers from highly functional feature phones to its own brand of smartphones before Apple, RIM, and others impress locals with their wares. OneApp could help in this area.

According to Mr. Softy's marketing material, the software "includes cloud services that help offload processing and storage from the phone to the Internet." In other words, users who want to access Twitter or Facebook on their feature phones will do so via the local cell network. Such "offloading" should preserve battery life.

Dumb phones aren't about to replace smartphones. But Nokia and its feature-phone-selling peers would dearly love to see them get smarter. OneApp, for now, may be all they need.

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Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Nokia at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy just rang for service.


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  • Report this Comment On August 26, 2009, at 10:27 PM, Phoenix002 wrote:

    This move smacks of desperation on both MS and Nokia's parts. Windows Mobile has made no impression on either the Palm Pre or the iPhone, despite years of head-start, and Nokia, despite dominating Europe, Middle-East, and South America, has seen its business and enterprise customers defect to Blackberry.

    This is only noteworthy as a publicity stunt. Apple and RIM have nothing to worry about.

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