Giant Alliance: Intel, Nokia Try Again

For the third time in a decade, the leaders in chipmaking and mobile-phone manufacturing join to create wireless devices. Success would roil the tech world

By Cliff Edwards and Olga Kharif

Intel and Nokia hope their third time is the charm. After two aborted attempts over the past few years to collaborate on wireless devices, the world's largest computer chipmaker and the No. 1 maker of mobile phones are at it again.

This time, Nokia (NOK) and Intel (INTC) said they're embarking on a long-term partnership to create mobile products that combine high-performance computing with high-speed wireless communication. As part of the alliance, Nokia will buy Intel chips while Intel licenses Nokia's mobile-phone radio technology.

The two also plan to collaborate on the software to be used in the devices, including the Intel-backed Moblin operating system and Nokia's Maemo operating system. Both use versions of Linux, whose source code is shared freely among developers. "Nokia and Intel share a similar technology vision," said Anand Chandrasekher, senior vice-president and general manager of Intel's Ultra Mobility Group.

In a June 23 press conference announcing the deal, the companies said little about the kinds of devices they're planning. But if it pays off, the alliance could broadly reshape the computing and communications industries. Nokia has been trying to expand beyond its core mobile-phone business into other types of handheld computers such as netbooks, while Intel for the past decade has been looking to challenge chipmakers Qualcomm (QCOM) and Texas Instruments (TXN) in the fast-growing market for advanced mobile devices.

Potential losers include Microsoft (MSFT), which has trying to lure Nokia to its Windows Mobile platform, and Nvidia (NVDA), which has been challenging Intel and others with its own cellular-phone chip package.

Creating a New "Class of Device?"

While slim on details, Nokia and Intel hinted that they may attempt to create entirely new categories of devices. In a press release, Intel and Nokia said the mobile products will move "beyond" existing wireless computing devices, including smartphones, netbooks, and notebook PCs. Intel has been trying to create a new class of pocket-sized products it calls mobile Internet devices, or MIDs. Nokia has offered what it calls an "Internet tablet" for several years but has not gained much traction with the device.

The two could potentially cooperate on other gadgets, including wireless e-readers similar to Amazon's (AMZN) Kindle. "This collaboration will likely lead to a class of device…that recognizes the context of its user's environment and bends to its user's needs," Kevin Burden, a practice director at consultant ABI Research, wrote in a research note.

Intel has been trying to emulate its competitors by offering complete packages of processors and such related products as flash memory and modems that handset makers can more easily integrate with their devices, thereby getting finished products to market more quickly. As part of that effort, the Santa Clara (Calif.) chipmaker has been working to improve the performance of its low-cost, wireless-friendly Atom processor while lowering its overall energy consumption.

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