The news leaves open other questions, including what processor platform Nokia will adopt. Most of the first crop of Windows Phones used Qualcomm's Snapdragon processor.
Nokia struck a broad development deal with Intel in June 2009 that included work on the mobile Linux software that ultimately became MeeGo. Intel had hoped to make Nokia a lead OEM for a 32nm smartphone SoC based on its Atom processor, a prospect that now appears dim.
The deal also says nothing about Nokia's plans in the emerging tablet market. Nokia has shipped Wintel-based netbooks and dabbled in other mobile form factors, but not taken a position on tablets to date.
By embracing Windows Phone, Nokia effectively rings a death knell both for Nokia's legacy Symbian platform and to its emerging MeeGo platform co-developed with Intel. In a leaked letter from Elop earlier this week, he complained the company's development efforts were so slow it might only ship one MeeGo phone by the end of 2011. In press announcements, Nokia said it still plans to ship a MeeGo system this year.
As part of the deal, Nokia announced it will make MeeGo open source and it will make Symbian a "franchise platform," but what it means by that term is unclear. Nokia had already made Symbian an open source OS, and other Symbian partners such as Motorola have abandoned Symbian for Google Android.
Nokia said it has an installed base of 200 million Symbian handsets. Nokia expects to sell approximately 150 million more Symbian devices in the years to come, it said.
The Finnish cellphone giant will be especially vulnerable until it gets a family of Windows Phone handsets out the door. Meanwhile most developers likely will abandon any efforts on Symbian and MeeGo.
Some analysts including Will Strauss, principal of Forward Concepts (Tempe, Ariz.), praised the deal as a win-win.
"Nokia badly needed a non-Symbian OS," Strauss said. "Adopting Android would make them simply another me-too house, and MeeGo has not been proven," he said.
"Although Windows Phone is late and badly trailing iOS and Android, the reviews have been generally very good, but Windows Phone is on very few handsets, and Nokia fills that need for Microsoft," he added.
Analyst Mark McKechnie of Gleacher & Company agreed. “We believe the combined Microsoft/Nokia ecosystem puts both companies in a stronger position in the battle for third, with RIM's Blackberry and Hewlett-Packard [and its WebOS] still in the race,” he said.
In a London press conference, Elop said the deal makes the smartphone business a three-horse race, presumably referring to Apple's iOS and Android as the other players. But his comment conveniently overlooked Research in Motion which is broadly expected to maintain a strong player.
"Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale," said Elop at the news conference.
"The partnership provides incredible scale, vast expertise and software innovation and a proven ability to execute," said Microsoft CEO Steven Ballmer on hand for the event.