Giant Alliance: Intel, Nokia Try Again

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The alliance with Nokia gives Intel yet another platform in which Atom could be used. "The big takeaway for Intel is, they've got another radio and communications standard they can use with the Atom," Gartner (IT) analyst Leslie Fiering says. "It could increase its attractiveness in communications devices."

Rivals Dismiss Any Talk of a Threat

Nokia said it will maintain its existing relationship with Qualcomm and other makers of the chips in its cell phones. Analysts noted, however, that the competition would give Nokia leverage in ongoing negotiations with Qualcomm—and others—about the price it pays to use its chips and technology portfolio. "Over time, if Atom proved spectacularly successful for them, it could start to cannibalize [offerings from Nokia's longtime suppliers such as Qualcomm and Texas Instruments]," says Fiering.

Representatives of Qualcomm and Texas Instruments said they're not worried. "We always expected that Intel would enter this market," says Qualcomm Senior Vice-President Bill Davidson. "There's plenty of room for competition. It's a massive market." TI spokeswoman Amy Drozd said, "We feel very good about the position we have in the market today."

Indeed, Nokia and Intel haven't played well together in the past. With great fanfare in late 2006, Intel said it would license Nokia's 3G modem technology for use in Centrino notebook computers. It quietly backed out of the deal months later. Nokia announced it would collaborate with Intel on the next-generation WiMAX broadband technology and even offered a WiMAX-enabled Internet tablet. Executives at the Finnish phone maker have since become big backers of the competing Long-Term Evolution next-generation wireless technology.

Times have changed, Kai Öistämö, who runs Nokia's devices group, said during the press conference. "If you go back eight, nine years, at that time people intellectually agreed that was really not the right timing for that," he said. "Now mobile and computing industries are coming together. This is the right time."

Competition also makes the timing right. Qualcomm and other rivals have been trying to break Intel's hold on the PC market. And PC makers, including Acer and Asus, are readying smartphones designed to break Nokia's dominance, which already is being challenged by the likes of Apple (AAPL) and Research In Motion (RIMM).

Edwards is a correspondent in BusinessWeek's Silicon Valley bureau. Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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