Its really their only option. Symbian wasnt going anywhere and Meego is a non starter. They NEEDED to partner with someone. There were really 5 possibilities. And i'll list them from least to possible.
Good luck getting Steve Jobs to license his software for anything other than hardware he produces. Plus Nokia needed to create multiple devices for multiple price points. This would sully the iOS brand.
- Same with Apple except they're actually in the same position as Nokia right now. They are bleeding market share and mindshare and no innovation in the present future. They have a new OS based on QNX coming but its not expected until late next year. We;re currently on BB OS6 and the next revolutionary OS from them is gonna be OS8. I predict by 2015, they'll be struggling to survive as a company.
- Now this is actually a very very good OS. But its mindshare is incredibly small. IMO Nokia wouldnt have done bad if they had gone with this but with increasing competition from MS, Apple and Google, Nokia's brand recognition wasnt gonna be enough to save both of em. HP is trying hard to put this OS on everything from phones to computers to printers. Time will only tell how this will work but in this age, you cannot just create a phone and an OS. U need an ecosystem. And they're failing on that part right now.
Now the final choice actually came to this and WP7. Nokia actually had long negotiations with both Google and MS. In the end, MS gave Nokia a bunch of money to choose it over Google but i dont even think that was necessary. Nokia could very well had chosen Android and would have been successful somewhat. But then it relegates itself to just a hardware maker and an also-run in a sea of multiple Android phones. Nokia has too much pride to do this. Nokia also sells a lot of diff phones at diff price points but they're all quality phones. Had it gone with Android, it would have been competing with a lot of Chinese manufacturers who blatantly copy Nokia's design anyways. Back then, the OS and the User Experience(UX) was the differentiator. Since Android is "free" this wont be the case anymore. And Nokia would be no different than the Foxconn's and the HTC of old.
1. Windows Phone 7
- This imo was the only logical choice Nokia could have made. Yeh MS was pretty late to the new gen mobile OS game but it actually came to a gun fight with actual guns and getting ready to unleash bazookas this fall. Both guys need eachother. Nokia needs an extremely well designed OS to put on its dependable hardware to sell. Most importantly, Nokia needed for its phones to stand out in the market. Currently, MS has hardware partners in HTC, Samung and LG making WP7 phones. But all of them consider WP7 as their secondary OS. WP7 will be the primary OS for Nokia so they get certain privileges that the other OEMs dont get. MS also needs Nokia's hardware design and brand recognition. So Nokia knows they wont be abandoning them soon. See Microsoft can think of Nokia as its own Hardware division now.
Another important point is that WP7 IS DIFFERENT. All the other OSes look the same. Android, iOS, BBOS, WebOS; They're all a grid of tiles. Nokia gets to differentiate itself and position itself aggressively as the alternative to Android and iOS. Now you combine Nokia's hardware with windows software and fast growing eco system, its easy to see that they'll become very relevant as time goes on.
Lets not forget that this is a bilateral deal. Although Nokia's software was mediocre, they have a very excellent ecosystem. Their OVIstore marketplace is very healthy, has tons of developers and they are unique in the fact that they have relationships with over 130 operators over the world where app purchases can be billed through the consumers phone bill. This is something they would have lost had they gone with Android. Instead they get to intergrate this with MS's Marketplace.
Their mapping solution is probably the best in Europe and microsoft will be paying Nokia to license these solutions. So not only do they get to make hardware which is their forte but they also get to continue working on improving their current assets which they would have had to sell if they had gone with Android. Lets not forget that even though Android is free, some key technology used in Android is actually owned by Microsoft. HTC for instance pays MS $40-$80 for every Android phone it makes and $15 for every WP7 phone it makes. Sucks for HTC, but good for Google cos it gets its money when users use the device, not when they purchase it.