By Maggie Shiels
Technology reporter, BBC News, Silicon Valley
Analysts say mobility and portability is the way of the future
The world's largest chip maker has teamed up with the world's largest mobile phone maker to create what they say will be a "new exciting industry".
Intel and Nokia said their "technology collaboration" would deliver new mobile computing products - beyond existing smartphones, netbooks and notebooks.
But both companies added it was still too early to talk about product plans.
The deal gives Intel its first real breakthrough in the multi-billion dollar mobile-phone market.
"This collaboration will drive exciting new revenue opportunities for both companies and shape the next era of mobile computing," said Anand Chandrasekher, Intel's senior vice president of its ultra-mobility group.
Nokia's executive vice president for devices, Kai Oistamo said: "It will be compelling not only for our companies, but also for our industries, our partners and, of course, for customers."
"Brave new world"
Both companies said the partnership would centre around several open-source mobile Linux software projects, including the Moblin platform for Atom-based processors and the Maemo operating system developed by Nokia.
Intel will also acquire a licence from Nokia that is used in modem chips to connect to third generation cellular networks.
Intel's chips power most of the world's personal computers
Although Intel makes chips for Wi-Fi and WiMax networks, it has previously lacked the technology to provide a complete technology package for portable device makers.
In a conference call with reporters, neither company would not be drawn on what any future products would look like.
"We will talk about products when we are ready to talk about products," said Mr Chandraseckher
"With the convergence of the internet and mobility as the team's only barrier, I can only imagine the innovation that will come out of our unique relationship with Nokia. The possibilities are endless."
ABI Research says that last year a total of 1.2 billion mobile phones were sold globally.
Mr Oistamo was equally tight-lipped on the subject of future products, but he added: "We will explore new ideas in designs, materials and displays that will go far beyond devices and services on the market today.
"The future is truly exciting and there is a lot of room here to redefine what mobile is and what it can do as we create this brave new world."
"Wave of the future"
Intel's microprocessors are found in eight out of 10 personal computers, while Nokia boasts around a billion customers but is not as big a player in the US as it is in Europe.
The alliance could spell stiffer competition for ARM Holdings, which is one of the biggest suppliers of chips in the cell phone marketplace.
The deal will boost Nokia's presence in the United States
Analysts welcomed the collaboration, which they described as significant for both companies.
"Intel has really been trying to get a foothold in the wireless world in the worst way," Will Strauss, principal analyst with Forward Concepts told the BBC.
"They know portability, mobility is the wave of the future. Nokia is the world's biggest cell-phone maker in the world so getting a piece of Nokia's business is a big deal.
"For Nokia its a way to get into notebooks and netbooks. They are not big there and partnering with Intel as the largest manufacturer of chips will lend them credibility in that market," said Mr Strauss.
Gerry Purdy, who is the chief mobile analyst at Frost & Sullivan agreed the deal is a win-win for both Intel and Nokia. He added that while the first product could be a year or so away, it should have the potential to shake up the market.
"I believe this will impact the industry for many years to come and accelerate the adoption of smartphones in the world. At the moment they are at 10% of market share. I predict that will grow to 50-60% in the next five years as a result of this partnership.
"The direction we are heading is more computing power. We are seeing some exciting iPhone-like capability out there like graphics interactivity, multi-touch, video, lots of multi-media and the like.
"All those things are exciting in the industry but they are not pervasive and I think maybe this collaboration will help create that," Mr Purdy told BBC News.