Nokia Corporation (NYSE:NOK) faces prospect of diminishing market share with Microsoft Corporation(NASDAQ:MSFT)

Finnish handset maker Nokia Corporation (ADR)(NYSE:NOK) is trying to battle it out in a market where it has a diminishing market share, according to RBC Capital's Mark Sue.

In an ecosystem which is dominated by Google's Android operating system followed by Apple's iOS, Microsoft is trying to be the third with Nokia as only ONE of its hardware partners.

The European company, that recently launched a new series of Lumia smartphones, has to battle it out not only with Samsung but a host of others with whom Microsoft Corporation(NASDAQ:MSFT) is partnering.

Samsung handsets, it may be remembered, running on Android, are already market leaders in the smartphone segment. For Nokia, the share gets divided even further.

According to Sue, "Nokia (6.9 percent share) continues to donate market share along with peers such as HTC (6.2 percent), Sony (4 percent), and Motorola (3.7 percent) as market leaders Samsung (34 percent) and Apple (17.5 percent) gain share at their expense. Smartphone competition remains fierce and profitability remains elusive for smaller players, Nokia included."

Sue says that Nokia has bet wrong by throwing in its lot with Microsoft’s Windows 8 and that it should have gone along with Android instead.

He pointed out that though the Nokia Lumias have received favourable reviews, investors remained sceptical about its appeal in the marketplace when compared with competing products from Apple and Samsung, such as iPhone 5 and Galaxy SIII.

Nokia has dumped its Symbian operating system, on which it was once dominated the mobile phone world, and has signed up Microsoft as its preferred partner.