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Nokia has just announced a new partnership with Microsoft. The world’s most popular mobile handset manufacturer will use the Microsoft Windows Phone OS as the main operating system for their smartphones.

Nokia, the handset manufacturing giant, has been going through a deepening crisis since the launch of the Apple iPhone in 2007. The company has decided to sideline their Symbian OS in favour of the Windows Phone OS for their smartphones.

Microsoft Windows Phone on a Nokia handset

Nokia will also use other Microsoft services such as the Bing search engine for their mobile phones. This could turn into a serious blow for Google Mobile and help Bing to gain a larger share in the mobile search market.

The move is expected to help Nokia fight the growing popularity of the Apple iPhone as well as the Google Android platform. Nokia’s new Chief Executive, Stephen Elop, worked with Microsoft until last September, when he took charge of Nokia. The relationship comes as no surprise, not only due to Elop’s historical associations with Microsoft, but also because of the fact that Google is seen as a competitor.

According to Elop, “Nokia is at a critical juncture, where significant change is necessary and inevitable in our journey forward. Today, we are accelerating that change through a new path, aimed at regaining our smartphone leadership.” He also indicated that there would be a management reshuffle, and some people may also lose their jobs.

Though Nokia is still the largest handset manufacturer in the world, its market share has fallen from 36.4% to 28.9% in the last year.

Reactions to the announcement have been quite negative, and the price of Nokia shares has fallen 9.8% since the announcement. Even though this could be Microsoft’s biggest stroke of luck, with respect to mobile search, their shares didn’t rise much either.

Could this be both Microsoft and Nokia’s chance to strike the smartphone and mobile Web markets and make a serious change in both their fortunes?