Reindeer Antlers and Reykjavik: How Microsoft and Nokia Are Getting Down to Business Together

Like many marriages, the partnership between Nokia and Microsoft began with a lot of celebrating and travel and presents. And reindeer antlers.

As both companies’ chief executives announced their partnership in London in February, the Windows Phone team gathered at Daman’s, a watering hole near Microsoft’s Redmond headquarters. Having sealed the most important mobile deal in the company’s history, the workers toasted each other with a custom concoction they dubbed the Noble Finn:

A combination of Finlandia vodka, Chartreuse, sparkling soda, sugar and lemon juice, stirred with a reindeer antler.

The next month, Windows Phone engineering head Terry Myerson and a group of his co-workers traveled to Finland to get to know some of their Nokia compatriots better. The teams went snowshoeing (pictured right), then hit a dry sauna to warm up.

“We ran out of the sauna on fire and rolled around in the snow to survive,” Myerson said. “It was indescribably hot.”

The next day, with the courtship phase over, it was down to business, as Myerson and his team toured Nokia’s factory in Salo, Finland.

So far, executives on both sides of the partnership insist the marriage is a happy one.

“We’ve spent the last couple months working really closely together to get first products really materializing,” Nokia’s Jo Harlow, who is in charge of Smart Devices at the phone giant, said in an interview. “We all feel confident about where we are.”

Although the deal was announced in February, the paperwork wasn’t signed until April.

Well before all the i’s were dotted and t’s crossed, though, the engineering teams had already been hard at work, the companies said. Nokia had prototype hardware designs running prerelease versions of the next Windows Phone software.

Nokia CEO Stephen Elop has been boasting for a while that he is carrying something along those lines, and a recently leaked video shows him with an early version of the hardware.

Harlow declined to comment on that leak, but says she is increasingly confident in the first product that will arrive this year, and that the company may yet have multiple devices for sale before the end of the year. The first Nokia phones are expected to arrive this fall alongside Mango, the first major update to Windows Phone 7.

“I’m committed to one model this year,” Harlow said. “More would be great.”

For next year, though, Harlow said there will be a steady stream of releases — something that Microsoft badly needs as it tries to keep up with rivals, particularly Android devices, which are released on a constant basis.

If Microsoft was close to the latest hardware when it released the first Windows Phones last fall, it is fair to say that its models now look dated when stacked up against the latest Android models, some of which boast 3-D screens, dual-core processors, high-definition video recording and other features.

“I’m hoping that won’t be an issue next year,” Myerson said.

Harlow said her goal is that Nokia will have more frequent hardware updates, keeping the company, and by extension Windows Phone, front of mind with phone shoppers.

As the two companies settle into working with one another, they are using a variety of methods to manage their long-distance relationship.

Although most physical travel involves workers from one company visiting the other, the two companies have also found an in-between location to meet — Reykjavik, Iceland.

Why? Because it’s roughly in between Finland and the U.S., and there are direct flights from both Helsinki and Seattle. On occasion, executives have often met at Iceland’s government-owned Culture House, a spot just a couple blocks from the Höfði, the spot where Ronald Reagan and Mikhail Gorbachev held a now-famous summit in 1986.

While the Americans and Soviets often struggled to find peace after a long Cold War, Harlow and Myerson say they share a good deal of common ground.

Nokia and Microsoft find themselves in a similarly tough position in the mobile space. Both companies have fallen behind Android and Apple’s iPhone in the smartphone race and have bet their future on each other as the way to recover.

There are other ties binding Myerson and Harlow: Both graduated from North Carolina’s Duke University; Myerson got his engineering degree in 1991, and Harlow, who graduated in 1984, was captain of the women’s basketball during her time in Durham. To honor the shared heritage, workers at Nokia presented both executives with custom Nokia E7 phones emblazoned with the logo of Duke’s mascot, the Blue Devil (pictured left).

While Harlow said she expects to rack up plenty of frequent-flier miles as a result of the deal, the intercontinental travel has been reduced thanks to a video conferencing technology known as Halo.

“We were planning on going to Finland, but decided to give Halo a try first, and decided we didn’t need to fly over there [as much],” said KC Lemson, who works for Myerson on the Windows Phone camera team.

Myerson echoed the importance of Halo, which he said he hadn’t used before the Nokia deal came together. The customized room lets a team in one place seem like they are separated only by a window from colleagues sitting halfway around the world.

“It’s as if we are sitting in the room with people in Finland or London,” Myerson said. “It’s like something out of ‘Star Trek.'”

Halo is used, on average, five or 10 times per week to bridge the engineering teams from Nokia and Microsoft.

But sometimes that’s not enough, of course. Nokia has transferred a top executive — Waldemar Sakalus — to Seattle to oversee the Microsoft relationship, and is spreading hardware development work across several locations, including San Diego, Calif., and Beijing, as well as two sites in Finland: Salo and Tampere.

Nokia also hired Kevin Shields, a former member of Myerson’s Windows Phone team, to oversee Nokia’s efforts to build on top of Microsoft’s operating system.

For its part, Microsoft said it has shifted its priorities to make sure that Nokia’s needs are being met first. The company has increased its focus on going global more quickly, as Nokia counts on Windows Phone to quickly fill a gap created by the rapid decline in its existing Symbian phone business.

“We had been focused on North America and Western Europe,” Myerson said of the company’s early efforts. That, he said, has now changed.

Although Microsoft is also working with its other partners, Myerson isn’t shy about saying that he is pouring more energy into his partners in Finland. After all, while HTC and Samsung build Windows Phones, they also make phones running Google’s Android software. Nokia, meanwhile, has pledged to make Windows Phone the core of its smartphone strategy.

“We are prioritizing work proportionate to Nokia’s commitment to Windows Phone, which is unlike anything we have had before,” Myerson said.