The stock market has not responded well to the news, driving down the company;s share price Friday and Monday.
The partnership will make Windows Phone 7 the primary operating system for Nokia’s smartphones. Microsoft will also start using Nokia’s mapping and location services in Bing.
Elop joined the Finnish company last year after serving as president of Microsoft’s Business division and launching Office 2010.
He sat down for an interview today t Mobile World Congress to talk about why this makes sense for Nokia and why going with Microsoft, even as an ex-Microsoftie, was not a foregone conclusion.
The company has seen its smartphone growth slow as Apple and Google galloped by. The decision to go with Windows Phone 7 as a primary smartphone platform is the company’s bid to recapture the smartphone market.
Here is an edited interview.
Looks like the reception is pretty negative in the stock market. How do you turn that perception around?
It comes down to two things. One is we have to remove ambiguity, for example, in terms of how much are we going to reduce operating expenses. It’s a question we have not answered deliberately. Also there is ambiguity about what is the first device and ambiguity about managing through the Symbian transition.
The way through that, one word — execution. We have to put the plan through about how we change operating expenses, how we deliver Symbian to consumers while transitioning to Windows Phone. As we demonstrate ability to execute we hope we will be rewarded.
You’re saying it’s uncertainty. It seems like too much certainty about Microsoft’s future is weighing that company’s stock price down, as opposed to Apple’s stock, which is highly valued because of ambiguity surrounding what it will bring to market next. How do you balance the uncertainty that shareholders like and dislike?
When there’s uncertainty about a plan and impact it’s going to have on employees and market share, uncertainty is something that scares investors. However, we had to make a bold decision in terms of our smartphone strategy, given how rapidly the market is changing.
The way I would characterize the reaction of investors, even employees, is the strategy of making that bold step is being very well received. That includes many of investors I’ve spoken to.
I’ve heard that Nokia will get billions of dollars from Microsoft. Microsoft is calling it a royalty relationship. How is it going to work?
All of the above is true. The deal respects a couple of principles. Windows Phone is a royalty-bearing product, and we will be paying royalties to Microsoft in recognition for its software development work.
At same time, where that would be a normal OEM [original equipment manufacturing] relationship, there are many other elements of this. We are contributing services assets, all sorts of know-how and the chance to help Windows go global.
We are contributing the opportunity to shift a very substantial part of the market to Windows Phone. … We could have shifted it over to Android. There is value associated with that decision alone.
There are B’s, not M’s, of value being transferred to Nokia.
Does this exclusive relationship apply to tablets you have planned?
There’s no exclusivity. We will do work in different segments of the market with different platforms. There’s no exclusivity either way. Microsoft will continue to work with other OEMs [phone makers].
The relationship with Microsoft did not encompass tablet specifics but it creates an interesting opportunity. We could — and it has not been decided — we could introduce a Windows tablets; we could do tablets either internally and choose to do something else.
Could that include Android?
You were asked earlier whether you were a Trojan horse for Microsoft at Nokia and you said no. So what was your role?
I see my role as leader of company who had the choice to make between three choices: go it alone with Meego, Droid and Microsoft. I drew together internal group from management and advisers, ultimately ending up in a unanimous decision of the management team and the board that made the decision.
Anything else you want to say to Redmond?
I think the really exciting point is we have created a three horse race with Apple, Android now the Windows ecosystem. Together we’re going to build just a great opportunity going forward. And it snows as much in Helsinki as it rains in Seattle.
(Photo of Stephen Elop: Nokia)