Nokia and Microsoft Looks Like a Desperate Hook Up

Nokia’s (s nok) new leadership under ex-Microsoft (s msft) executive Stephen Elop has reportedly met with Microsoft to plan a line of Nokia phones that would run the Windows Phone 7 software. This is according to Russian blogger Eldar Mutarzin, a noted tech writer with connections inside Nokia. The two sides may just be chatting, as all big companies do at some point (see Google (s goog) and Nokia) but the prospect of Nokia hardware sporting a Microsoft OS is intriguing, because it would signal a major shift on Nokia’s part, suggesting it needs serious outside help in getting its smartphone business in order.

That it would turn to Microsoft is also curious, though a little less unlikely now that Elop joined Nokia as CEO. Microsoft’s Windows Phone 7 software just launched, and early sales don’t appear to have taken off, despite some generally positive reviews. Tying the company to Microsoft’s nascent platform, even for one distinct line of phones, would go against the words of outgoing Mobile VP Anssi Vanjoki, who dismissed the idea of building phones running Android (s goog), saying it would be like a boy peeing in his pants for warmth. Why would Microsoft be different?

If anything, it’s less proven in the marketplace and still in the process of adding some basic features. Nokia has also said the future is in its MeeGo operating system for high-end smartphones, and is pushing its Symbian 3 operating system. Symbian 3 is still raw compared to iOS (s aapl) and Android, and Nokia is hoping its QT development framework will help unify the platforms for developers. Pushing Microsoft would only muddle the picture for Nokia software developers unless Nokia can tie Windows Phone 7 into QT.

But turning to Microsoft could be helpful for a company that has been slow to gets its smartphone act together. The company just delayed the release of the E7 after the N8 also slipped its launch date. As my colleague Kevin pointed out, Nokia likely pushed back the release of the E7 to improve its software experience, suggesting that Symbian is still in need of a lot of work. Meanwhile, MeeGo isn’t set to launch until mid-2011, which will put Nokia further behind its rivals.

Utilizing Microsoft could just be a stop-gap effort until Symbian 3 and MeeGo really find some momentum, or it could be a test for Nokia as it looks to support other operating systems. Either way, Microsoft’s OS may be a more attractive alternative than Android for Nokia. It is, despite some deficiencies, very polished and it would seem to have fewer patent concerns, something Google’s Android is having to deal with. And it could give Nokia a way to break into the U.S. market, where it has almost no presence. Nokia has great hardware; it just needs some good software. Meanwhile, Microsoft could use all the support it can get in trying to become relevant on smartphones again.

Ultimately, if Nokia goes this route, and there’s no guarantee it would, it would show a lot of desperation. It’s crazy to think the world leader in smartphones still doesn’t have a credible answer yet to the iPhone (s aapl), more than three years after the iPhone’s launch. My advice for Nokia would be to develop something in-house so it doesn’t become a commodity smartphone player and isn’t dependent on a third-party for its software. But if it can’t get its own smartphone OS plans together, something it failed to do in the last three years, turning to Microsoft might be its best play. With market share declining in the face of iPhone and Android sales, it’s clear Nokia needs to do something.

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