Nokia once dismissed the iPhone as a lifestyle phone. Today, it had to make a hard decision and do a deal with Microsoft for its very survival. The iPhone has made tremendous inroads in the smart phone market and to remain competitive Nokia has chosen Microsoft’s Windows Phone 7 software to power its future smart phones.

Nokia shareholder dumped its shares as they realized that the company’s future was no longer under its control. It has become a device manufacturer that has given Microsoft its entire distribution. Microsoft is paying Nokia to have it software on its handsets.

On the high end Nokia is being beaten by Apple and on the low end it has to compete with Google Android that is free to handset makers. Hence Nokia has its work cut out.

BusinessInsider point out that: Over the last decade or so consumer products that have done really — Apple’s iPod, the BlackBerry Pearl, Apple’s iPhone and iPad, Microsoft’s Xbox, Nintendo’s Wii — they have something in common: The same company designed, built, and tightly integrated both the software and the hardware. This is the ideal, by going with third-party software, Nokia is taking a huge risk.