Following a vaguely worded invite to a press conference sent out by Yahoo Thursday, word leaked out via Kara Swisher's BoomTown blog that the company is planning to announce a broad partnership with Nokia.
The alliance is expected to entail Yahoo building email, search and other applications and services into a variety of Nokia devices. The deal, code-named "Project Nike," had reportedly been fast-tracked after the two giants had kicked the idea around for several years without result.
It also follows on the heels of Yahoo renewing its pact with Samsung to provide a range of mobile services across the manufacturer's handsets and bada operating system. Yahoo has long touted its long list of partnerships with mobile operators, so adding the biggest handset maker of all in Nokia isn't a surprising step.
But how big a payoff will this prove for Yahoo? Nokia has become the industry's lumbering legacy player, watching as other companies -- including Apple, Google and BlackBerry -- rapidly gain share in the fast-growing smartphone segment. Smartphone sales increased nearly 50% in the first quarter compared to 17% for mobile phones overall, according to data released this week by Gartner.
While Nokia remains the world's top handset seller, it lost 1.2% market share year-over-year, with the company doing all right with mid-tier phones but lacking "a high-volume driver in the high-end," according to Gartner. That means Nokia hasn't had a hot smartphone to compete with the iPhone or Android-based phones from manufacturers like HTC.
What's more, the Symbian operating system on which most Nokia phones runs continues to lose share, slipping to 44.3% in the first quarter from 48.8% a year ago. Android, by comparison, has gone from 1.6% to a 9.6% share, and iPhone from 10.5% to 15.4%.
And while Apple and Google have built ecosystems around their respective platforms with application storefronts and tailored devices, Nokia hasn't offered much of a threat with its Ovi Store. What's more, Nokia still doesn't have a presence in the U.S. market with either feature phones or smartphones.
Obviously, Nokia is hoping Yahoo can help it make its handsets more attractive and become a more serious contender in the smartphone market by packaging devices with popular Yahoo apps. From Yahoo's perspective, hooking up with a manufacturer that's an also-ran in the smartphone race won't help it gain ground in the segment where users are most actively accessing the Web and mobile apps.
At the same time, Yahoo doesn't have its own mobile operating system or app ecosystem to bolster Nokia's core technology. So how much the two old-line Web and mobile companies can benefit each other by teaming up is questionable. Buying Palm might have been a better move for Nokia, in order to acquire the company's well-regarded webOS and shift away from Symbian. But more details of the Nokia/Yahoo deal should be provided on Monday.