There has been some speculation floating around the web this holiday season about the possibility that Microsoft’s Windows Phone 7 platform could end showing up on Nokia smartphones sometime in 2011.

This of course has led to some added (and I think eggnog fueled) thoughts that maybe Microsoft should just bite the bullet and buy itself a handset maker i.e.: Research in Motion (RIM) or quite possibly, Nokia.

Now when it comes to the rumors about Windows Phone 7 powered Nokia smartphones we have soon-to-be Nokia ex-employee Watts Martin saying that this could never happen, using a Nokia to Apple comparison:

A lot of the reporting on Nokia I’ve seen seems to miss a fundamental fact: they are, in their fashion, just as insistent on control over their ecosystem as Apple is.

This hasn’t stopped Matt Rosoff via Business Insider from suggesting that rather than just powering Nokia phones, Microsoft should buy the company.  Now, if I remember correctly, either Paul or myself suggested this in one of our recent Daily Brief episodes to be a viable idea – not a necessarily good one – just a viable one.

However silly the idea might sound to some, Matt makes a couple of good points in his post as to why this would be a good plan for Nokia and Microsoft.

The first point is that the software end of the smartphone business sucks return wise, given that Microsoft doesn’t charge more than $15 per license, which means selling a crapload of licenses to make it a billion dollar business. Throw in the fact that Google gives android away for free and one can see how it will be hard for Microsoft to come from behind profit wise.

By acquiring Nokia Microsoft would have access immediately to a global reach due to Nokia’s 28% global marketshare as it shipped 117 million handsets in the third quarter of 2010.

Of course there is the standard nod towards the Enterprise but more interesting in the afford-ability of Nokia.

Nokia is more affordable than ever. Microsoft has been hoarding cash again since the downturn, and the value of its cash and short-term investments stood at more than $44 billion at the end of September. Nokia’s market cap is about $38 billion. At the end of 2008, Microsoft had only $21 billion in cash, and Nokia was worth more than $50 billion.

Now quite rightly Matt points out the nightmare that integrating the companies would be (would make a Yahoo – Microsoft buyout look like a walk in the park by comparison). However the solution in his mind would be for Microsoft to simply run Nokia as totally independent subsidiary that would use Windows Phone 7 as the preferred platform provider.

While a move like this would be one to surely piss off Microsoft current line-up of handset OEMs the company may not have the leeway to stick strictly with its typical partner type deals. There are too many players already in the market place that have a multi-year head start on Microsoft’s new mobile initiative so this could be an option to help cut that lead.

Matt asks the question where Nokia should bite but I think that regardless of how they feel about it Microsoft may have to seriously consider their options along this line. It’s not like they don’t have the money needed to pull off the deal – even a hostile one.

But should they?

I’m personally torn over the idea. On one hand I think it would be a perfect, if not difficult to pull off, option for both companies. On the other hand I’m wondering if it wouldn’t be too much of a distraction for Microsoft at a time when it needs to be razor focused on many fronts.

The mobile business, while definitely growing in importance, is still just a segment of Microsoft’s overall global product line. A product line that is facing its own varied pressure points. Xbox could be poised to become the set-top box to beat in the home. Office, and Office 365, is facing increasing pressure from Google and then there is Microsoft’s whole cloud effort.

In the end I just don’t think it is something that we are likely to see happen but then is a new Microsoft we are learning to deal with so who knows maybe Ballmer will have something really exciting to announce at CES this year.

Wouldn’t that be the buzz?

[Cross-posted at Winextra]