Nokia + Microsoft: Is Qualcomm an Effective Third Silent Partner?

Includes: MSFT, NOK, QCOM
by: Dean Bubley

I'm at the Nokia (NYSE:NOK) strategy event in London today, listening to Stephen Elop discussing the Microsoft (NASDAQ:MSFT) deal and wider issues around the company's strategy for smart phones, mobile phones and "future disruptions."

There's a ton of angles on this, which I've been dropping comments about on Twitter, and which are well covered elsewhere.

But I'm wondering if there's another angle in the discussion of "the Windows Phone ecosystem." All of the first batch of WP7 devices have been based on Qualcomm (NASDAQ:QCOM) hardware -- specifically, the Snapdragon processor.

Nokia had a long-running legal spat over patents with Qualcomm, which was resolved in mid-2008. Added towards the traditional antipathy of the GSM community towards CDMA, this meant that Nokia firstly never developed Symbian devices for the broader U.S. market, and also missed Qualcomm's increasing competitiveness in creating 3G basebands and application processors. A year ago at MWC, Nokia announced the first Snapdragon-powered phone would ship by end-2010. It didn't happen. The N8 uses a Texas Instruments (NYSE:TXN) apps processor, and the rumored N9 hasn't appeared.

It's also not clear what's happening now to Nokia's deal with Broadcom (BRCM) for 3G chipset supply -- or what happens with its future LTE devices.

I suspect that Qualcomm may -- explicitly or implicitly -- turn out to be a big winner with today's announcement. It certainly seems likely that for Nokia to get its first WP7 phones to market ASAP ("focus on speed"), it will go down the proven route to get devices out as fast as possible.

The interesting thing here is that the big Q could therefore end up as a pivotal player in Apple (NASDAQ:AAPL), Android (NASDAQ:GOOG) and WP7/Nokia ecosystems -- although with the iPhone it's on the baseband side rather than the apps processor.

The big question mark is around the future role of Intel (NASDAQ:INTC) in mobile. It is clearly now being left out in the cold (again), as Meego is effectively being mothballed, at least from Nokia's point of view. It will be interesting to see its next move -- partnership with Samsung (OTC:SSNLF) on Bada, or RIM (RIMM) on QNX, perhaps? An acquisition of a company like MediaTek? Or a wholehearted move to support WP7 and Android however possible?