And The Microsoft/Google Battle Continues…

Microsoft (MSFT) is jumping quickly from one deal to another. However, all the moves seem to have implications for search giant Google (GOOG).

Last week, the company announced an agreement with Nokia (NOK) that makes some Office applications (Word, Excel and PowerPoint) available on Nokia’s Symbian based mobile phones.

We think this was a correct move for Microsoft, as Nokia’s scale and market position could be leveraged to compensate for weakness at its Windows mobile operating system. Even after a lot of effort, Microsoft’s mobile OS remains at fourth position. Symbian, the most popular mobile OS, remains a clear leader, followed by Research In Motion’s (RIMM) Blackberry and Apple’s (AAPL) iphone. Recent data by Gartner indicates that Microsoft Windows mobile OS has a 9% share of the market, versus Symbian’s 50%. At the same time, Google, with its clout and prowess, entered the market with its Android OS, securing agreements with most of the large handset manufacturers (except Nokia).

Starting in 2010, Nokia intends to use Microsoft’s Office Communicator Mobile in its cell phones, enabling seamless sharing and collaboration across PC and mobile platforms. The agreement calls for collaboration of design, development and marketing functions. This could, therefore, be a first step in the two companies’ plans for the increasingly convergent enterprise and consumer markets.

It is interesting to note that Nokia’s Symbian and Google’s Android are both open source platforms (although Nokia continues to invest in Linux-based Maemo as well). We think this is the most likely direction for mobile OSs of tomorrow.

The Microsoft-Google rivalry continues in other areas too. After entering into an agreement with Yahoo! that effectively takes over the latter’s search business, MSFT announced a freely downloadable version of the MS Office. The first agreement was intended to position Microsoft as a strong contender in the search market, while the second was intended to bring MS Office on par with Google Apps.

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