The first three months were dominated by a massive earthquake and tsunami in Japan in March, and Nokia’s decision to partner with Microsoft to deploy the software giant’s Windows Phone 7 software on its smartphones.

 

Damage caused by the Japanese natural disasters slashed silicon production by a quarter. While output of wafers, printed circuit boards and semiconductors fell, vendor’s high stock levels of the components meant they didn’t feel the effect of the slowdown until later in the year.

 

Nokia revealed it had partnered with Microsoft to make Windows Phone 7 the default operating system on its high-end smartphones.

 

Stephen Elop, Nokia’s new chief executive, claimed the firm had jumped from a burning platform though blogger Tony Poulos questioned whether that leap took the firm onto a leaky life raft rather than the solid ground the deal was intended to deliver.

 

The deal seemed stacked in Microsoft’s favor, given the firm’s struggle to transfer its dominance of desktop PC software to mobile devices, and resulted in plenty of questions about what would happen to Nokia’s current handset software – which the firm later answered by handing off control of Symbian development to consultancy Accenture.

 

Despite the collaboration, credit agency Standard and Poor’s issued its first downgrade on Nokia citing concerns the vendor’s market share would continue to slide before the first Windows Phone 7 devices hit stores.

 

Google chief Eric Schmidt later admitted he was disappointed to have been beaten to the punch by Microsoft, but refused to rule out a later collaboration with the Finnish vendor.