Intel gets some wireless cred

NEW YORK (Fortune) -- In order to crack the smartphone market it covets -- but has failed thus far to crack -- the world's largest computer chip maker Intel realized it needed a partner in the cell phone business. It ended up snagging the world's largest handset maker, Nokia.

The two companies Tuesday announced a long-term technology collaboration to develop a new class of "mobile computing devices" based on Intel's microprocessor technology. The partnership comprises three key areas: developing mobile chipsets based on Intel's x86 chip architecture; furthering the development of open source Linux software for smartphones and other mobile gadgets; and for Intel Corp. (INTC, Fortune 500), getting a license to put Nokia's latest 3G modem in future products.

Despite repeated questions from analysts and media, neither company would detail what those products might look like -- a phone or a netbook-like computer -- nor did the companies give a timeline on when the fruits of their new collaboration might appear in the marketplace. "This is about technology collaboration and a licensing agreement," said Anand Chandrasekher, Intel senior vice president and general manager of its Ultra Mobility Group. "We are not commenting on specific products today, I'll leave it at that. When we are ready to talk about products, we will."

The reality is that Intel today does not have a chipset ready that is suitable for a smartphone. Intel's Atom line of chips power the vast majority of netbooks, those low-power, clutch-sized computers. The second generation of Atom, dubbed Moorestown, though even stingier on power consumption, is not for handsets either. Designs from a number of electronics manufacturers -- the only one publicly announced is LG -- will use Moorestown in devices that are bigger than an iPhone but smaller than a netbook -- so-called Mobile Internet Devices or MIDs. Nokia (NOK) has tried to sell these recently and flopped. But will Nokia offer something MID-like powered by Intel's Moorestown chipset soon? Given today's announcement there is a very good chance.

It won't be until around 2011 that the third-generation of Atom, dubbed Medfield, will be ready for the market. This system-on-a-chip is being developed to power smartphones. It's destiny, as one engineer in Intel's Austin lab crowed, is to kick the pants of the incumbent in the mobile chipset world ARM. So will we see Intel inside a Nokia smartphone? You bet, but it will be at least a two-year wait. While they are waiting for Medfield to be ready, it looks like Intel and Nokia will be pushing this "new class" of devices. And you have to figure they'll be in the market sooner rather than later.

That will have to suffice until the Intel/Nokia team can really start a push into smartphones. While it owns the market outside of North America, Nokia is desperate to have a real competitor for Apple's iPhone and Research in Motion's BlackBerry, as well as Google's Android mobile operating system. Having Intel architecture inside, including access to all the applications developed since the beginning of the PC-era, not to mention the beginning of the Internet, could give them the edge they need.

Intel badly wants a way into the mobile world. For all its prowess in personal computers, Intel is not a major player in cellphones, which is the main computing device for much of the world's consumers. (Intel briefly produced a chip for cellphones, but decided instead to focus on broadband wireless technologies such as WiFi and WiMax.)

Now, though, Intel has found in Nokia an important -- and big -- customer for its mobile technologies. If Intel is going to succeed in the mobile market, it needs design wins. While today's collaboration announcement falls short of that, it's heading in that direction. Ultimately what will decide the success of this partnership is the gadgets these two companies can cook up together, and if at the end of the day, consumers are willing to swap out their BlackBerry or their iPhone for a Nokia/Intel smartphone.