Microsoft and LG Electronics have cut a deal to collaborate on the next generation of mobile devices. The agreement states the companies will work together on research and development, marketing, applications, and services for mobile convergence devices.”This agreement between LG and Microsoft will create critical momentum in the industry,” said Yong Nam, LG’s CEO. “With this partnership, mobile computing will truly become an everyday reality, and LG and Microsoft will be at the forefront of it.”

The deal could give Microsoft’s Windows Mobile OS a strong ally in the smartphone landscape. The Symbian OS is the dominant force with almost 60 percent of the marketshare, and will soon be going open source to try and retain that leadership.

Research In Motion’s BlackBerry OS is in second place, while Microsoft’s OS comes in third with about 12 percent of the market, but it has struggled to increase its foothold. Windows Mobile also is facing increased competition from the iPhone, as well as Google’s new open source Android operating system.

For LG, the move signifies that it going to start competing more for the smartphone dollar.