The trans-Atlantic freeze between Microsoft and mobile-phone giant Nokia began to thaw yesterday as the companies announced they would work together to make it easier for people to transfer digital music between their handsets and their personal computers.

The partnership also involves another regional company. Seattle-based Loudeye and Nokia launched a service yesterday that cellphone carriers could brand and use to sell music downloads playable on a phone or a PC. The announcements were made in France at 3GSM World Congress, an annual conference for the mobile-phone industry.

But the Finnish company hasn't fully embraced Microsoft, a company it once seemed bent on keeping out of the mobile software arena. The music service doesn't use Microsoft's digital-file format or its digital-rights management technology, and instead opts for alternatives expected to be more commonly used within the mobile industry.

Microsoft has agreed to make its Windows Media Player software compatible with those alternatives. In return, Nokia said it would enable its handsets to play music in Microsoft's format and work with Microsoft's digital-rights management system in the future. The service will also use Microsoft's digital media player to handle music played on PCs.

The companies didn't announce which cellphone carriers would begin using the technology or which handsets would be compatible. Nevertheless, the partnership is significant in that the world's largest software maker and the world's largest mobile- phone maker have agreed to begin collaborating.

"I think we'll probably see more alliances like this from companies that used to be fairly hard-core competitors in the given marketplace," said Mike McGuire, an analyst with GartnerG2.

Nokia dealt Microsoft a blow in the past when it decided to power many of its phones with operating systems made by Symbian, a London company of which Nokia owns a 48 percent stake. The relationship didn't seem any better last November, when Nokia quit the Computer and Communications Industry Association the day after the group ended its antitrust fight against Microsoft.

Why the turnaround? Perhaps the change of heart has something to do with Motorola and Apple Computer. Those companies are developing cellphones that will use Apple's iTunes music-player software.

A Nokia executive said yesterday that Nokia was simply more interested in bringing the cellphone and the PC closer together.

"We are focusing on the fact that we bring interoperability between the PC world and the mobile world and making the user experience much easier," said the executive, Pekka Pohjakallio.

The service developed with Loudeye allows customers to purchase a song or a musical ring tone and download it directly to their cellphones. The charge for the music would be added to their monthly cellphone bill. Customers can also download the same song to their computers, as well as move songs previously stored in the computers onto their phones.

Is the iPod killer finally here? Probably not. For one thing, the memory cards that can hold music for cellphones are generally limited to a 1 gigabyte capacity — enough to hold about 16 hours of music. Apple's iPod portable player can hold as many as 40 gigabytes.

Pohjakallio said yesterday that by next year the memory capacity for mobile devices could increase to anywhere from 4 to 6 gigabytes.

Michael Brochu, Loudeye's chief executive, said he expects the mobile digital music market to grow significantly this year.

"In the next 12 months, you're going to see this market really take off," he said. Devices are becoming more prolific and people are downloading music onto a vast number of them, he added.

Nokia is also working with yet another local company: RealNetworks. The two companies announced last week they were extending a partnership formed in 2002 so that RealNetworks' audio and video software could be shipped on a greater number of Nokia handsets.

RealNetworks' Helix technology is not compatible with the Loudeye service, but that could change if the market demands it, Loudeye said.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com

Qpass acquires German company

Qpass, which helps wireless carriers manage data services, said yesterday at the 3GSM World Congress in Cannes, France, that it has acquired Encorus Technologies. It didn't disclose terms of the deal.

A subsidiary of eONE Global, Germany's Encorus was acquired for its mobile-payment-software business called PaymentWorks. The program uses Simpay, a system employed by many European carriers.

Last month, the Seattle company acquired ucp morgen of Vienna, Austria.

Seattle Times business staff