The decision for Nokia to partner Microsoft is a signal that their strategies thus far have plainly not worked. The Nokia/Intel MeeGo operating system is simply too far away from a working version to appease shareholder concerns; meanwhile, Microsoft shipped under 2 million Windows Phone 7 devices in its first three months, despite a half-billion dollar marketing campaign.

Nokia is expected to ship its first Windows Phone handsets in early 2012, although favourable conditions could still allow for a Q4 2011 launch. IHS Screen Digest believes Nokia will skip the current Windows Phone 7 altogether and wait for the next major update which is due in the same time frame.

By choosing Windows Phone over Android, Nokia still aims at differentiating in the smartphone market and at increasing its share of the growing software and services revenue pie. An Android move would likely have cornered Nokia in a very dangerous commodity market where a pressured hardware margin is likely to hurt many manufacturers in the next couple of years.

As such, we will observe the transition for all things Nokia, including Symbian and the Ovi Store, to the Windows Phone 7 (WP7) platform. Nokia's projection of 150m Symbian handset shipments in the coming years gives a good indication of how it expects the transition from this platform to WP7 to work. In 2010, IHS Screen Digest estimates there were 100m Nokia smartphone shipments. Therefore, a 2011 and 2012 transition period is viable.

The deal is of great benefit to Microsoft. In partnering Nokia, it now has access to thousands of distribution points worldwide, and has greatly improved its chances of cementing its long-term competitiveness.

Securing a potent smartphone offering will however not be enough for either Nokia or Microsoft. Nokia's other major threat comes from the low end where Asian manufacturers threaten its low-cost/high volume handset business; Microsoft, on the other hand, still has to provide a viable alternative to tablet products, currently led by Apple's iOS and where Android is expected to make a remarked debut in 2011.

IHS Screen Digest will update its smartphone forecasts by March 1st to reflect Nokia and Microsoft's strategy change.