Nokia Ditches MeeGo Amid Microsoft Rumors

Nokia has reportedly canceled plans to introduce a phone based on the open source MeeGo operating system, a move that could pave the way for the Finnish phone maker to ally itself with Microsoft and its Windows Phone 7 operating system.

Nokia has called a press conference for Friday, at which it is expected to divulge the full details of a restructuring and strategic shift.

MeeGo is a Linux-based OS that combines Intel's Moblin project with Nokia's Maemo technology. Nokia previously announced that it would introduce a phone, called the N9, that runs MeeGo. Reports out of Europe now suggest that plan has been shelved.

The expectation now is that Nokia CEO Stephen Elop, a former senior executive at Microsoft, will forge an alliance with his former employer and develop a line of smartphones that run Windows Phone 7. Such a move would give Nokia access to an evolving new platform and the means to reduce R&D spending on in-house technologies like MeeGo and the Symbian OS.

Microsoft could benefit as a deal with Nokia would put its software into the hands of what is still the world's largest handset manufacturer, even though Nokia's presence in the U.S. is underwhelming. Nokia's share of the worldwide smartphone market slipped to 33.1% in the fourth quarter of 2010, down from 39% in the fourth quarter of 2009, according to market watcher IDC.

Nokia's biggest challenge appears to be from Google's upstart Android OS.

"Android continues to gain by leaps and bounds, helping to drive the smartphone market," said IDC analyst Ramon Llamas, in a research note Monday. "It has become the cornerstone of multiple vendors' smartphone strategies, and has quickly become a challenger to market leader Symbian."

Microsoft shares were flat in midday trading Wednesday, at $28.11, while Nokia was up 2.53%, to $11.57.