Yahoo Inc and Nokia Oyj said they would team up to boost their mobile Internet offerings, seeking to regain market share lost to rivals like Apple Inc and Google Inc.
Starting in the second half of this year, Yahoo will host Nokia's Ovi email on phones exclusively and Nokia in turn will provide maps and navigation for Yahoo.
At a news conference in New York on Monday, the companies highlighted the importance of expanding services for users in emerging markets, for whom the phone is increasingly the primary device for using the Web.
Nokia is the leading handset vendor in many emerging markets, but it has struggled to grow in North America. Nokia Chief Executive Olli-Pekka Kallasvuo said working more closely with Yahoo would help it compete in the United States.
Location, maps and navigation will get more mind-share, will get more attention in the U.S. and many more users in the North American market, said Kallasvuo. This is one step we're taking in making our position stronger in the U.S.
The role of mobile services and software has become much more important since Apple and Google entered the phone market, forcing traditional handset vendors like Nokia and Samsung to hurry to build up their offerings.
Nokia has splashed more than $10 billion in just a few years to build a new business by offering Internet services ranging from music downloads to e-mail, but these have so far won few paying customers.
Similarly, Yahoo has far less market cachet than Google, whose Android mobile operating system is used by many cellphone vendors from Motorola Inc to HTC Corp.
One could always say the partnering of losers doesn't make a winner, said Pierre Ferragu, analyst at Bernstein Research.
It is often true, but for Nokia, the right future that could lead to an interesting investment case is more about stabilizing its existing position and being successful in the mobile platform game, riding on the back of Apple and Google coattails only.
Neil Mawston, of the technology analysis firm Strategy Analytics, said in emailed comments to Reuters that the deal might help both Yahoo and Nokia to deliver some of their mobile services more efficiently and save on costs.
The deal could also be a first step toward closer cooperation between the two companies in mobile advertising further down the line, Mawston said.
Yahoo CEO Carol Bartz said the company had not invested sufficiently in its maps offering and hoped the partnership with Nokia would help it leap forward. Yahoo lost its focus on maps a couple of years ago, she said.
Bartz said that while the Nokia deal was not an advertising partnership, the offer of improved location and navigation technology would help drive Yahoo's bid to build local advertising and marketing services for consumers.
The ability to do local performance advertising is really on our radar screen, she said. Having location combined with great local content is what our users are looking for.
The companies also said they would start to cooperate on access to services, beginning by making it easy for people to use Nokia's Ovi user credentials across select Yahoo services.
Last month, Yahoo also struck a deal with Samsung to put its services and software more prominently on cellphones of the world's second-largest cellphone company.
Shares in Nokia finished Monday's regular trading session down 0.5 percent, or 5 cents, at $10.02, while Yahoo's stock closed up 0.4 percent, or 6 cents at $15.54.
(Reporting by Tarmo Virki and Yinka Adegoke, additional reporting by Alexei Oreskovic in San Francisco; Editing by Dan Lalor, David Cowell, Robert MacMillan and Leslie Gevirtz.)