The Great Debate

LONDON, Aug 13 (Reuters) - Once they were warriors battling one another on the digital battlefield. Nowadays, Microsoft and Nokia are worriers, huddling together for comfort.

The world's top phone and software companies need each other to compete with Apple, Google and Blackberry-maker Research in Motion (RIM), whose products increasingly define what users expect from phones and charge premium prices in consequence.

In the market for so-called "smartphones", Deutsche Bank estimates Apple and RIM now take home more than half of all profits, despite producing less than a third of high-end mobile phones. Nokia held a 45 percent share of the smartphone market in June, according to Gartner Inc. (Table 2 in Gartner release)

The news this week that Nokia will feature Microsoft's office software -- features such as Word and Excel -- on phones aimed at business users is symbolic of what is possible rather than significant in itself. It fell short of predictions in the gadget trade press that Nokia might introduce phones running on Microsoft's own Windows Mobile software.

But that doesn't mean their collaboration should be dismissed. There's more to this budding relationship than meets the eye.

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Research in Motion officials do their best not to laugh when asked if they fear the rise of a BlackBerry-killer, some theoretical device that does everything its coveted e-mail phone does, only better.

But BlackBerry’s biggest threat may come from itself. As the company’s latest quarterly results suggest, there is a gulf between its pricey corporate phones and price-sensitive consumer models that are cutting into margins.