Handset giant Nokia and Microsoft are to announce and alliance on Wednesday afternoon, designed to help both companies defend their market share in the handset space.

In the devices space, Nokia’s dominant position is looking somewhat vulnerable as the global handset market shrinks and high end devices become a more popular choice among consumers.

The Finnish vendor has a strong lead at the low end, which is the segment being hardest hit by the credit crunch, while newcomers like Apple and HTC with Android are securing up market share with attractive high end phones. As a result pundits are suggesting that Nokia may have to embrace other platforms in order to maintain its lead.

Given that the announcement  will come from Stephen Elop, president of Microsoft’s business division, and Kai Öistämö, executive vice president of Nokia devices, it seems unlikely that Nokia is going to run with Windows Mobile and more likely that the firm will roll out some kind of Microsoft Mobile Office platform. This would allow both companies to better compete in the enterprise space where Research In Motion (RIM) currently holds court.

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Another rumour circulating is that Nokia is seeking to decrease its reliance on Symbian and start developing more devices on its Maemo Linux-based platform which is used for tablet devices like the N810.

When telecoms.com contacted Nokia about this, the company would only say that it “remains strongly committed to its current open OS software strategy for smartphones, which is based on the world leading Symbian software.” However, it is known that the company is interested in Linux – in June the company hooked up with Intel to “define a new mobile platform beyond today’s smartphones, notebooks and netbooks” using Linux and open source technologies such as oFono, ConnMan, Mozilla, X.Org, BlueZ, D-BUS, Tracker, GStreamer, and PulseAudio.

In related news Nokia said that it has activated over one million accounts for its Ovi Mail service in the six months since it launched. The service is most popular in the developing world where users can get their first email address and create and manage their accounts without the need for a PC. The top five countries for Ovi Mail subscribers are India, Indonesia, Mexico, Russia and South Africa.

“More than just reaching a company milestone, this proves to us that there is a real appetite in the developing world for these types of tailored services,” said Tom Furlong, head of consumer messaging at Nokia. “For first time email users, Ovi Mail provides a digital identity.”