Nokia's Android Phone Concept Could Get Microsoft Approval

In a move that is sure to surprise investors and consumers alike, Nokia NOK is reportedly working on its first Android smartphone. Even more surprising is the fact that Microsoft MSFT may not stop the project after it finalizes its acquisition of Nokia's handset business early next year. According to AllThingsD, Nokia wants to "repurpose the open-source version of Android into a better entry-level smartphone" than the company's current offering. Nokia is said to be heavily customizing the software with its own aesthetics and its own set of apps. This may be similar to the way Amazon has employed Android within the Kindle Fire line of tablets -- by re-designing the consumer-facing elements to make it appear to be a more original operating system. Nokia's Android phone may ultimately feature an OS design that looks more like a Windows Phone than a typical Android device. Bing and Skype are expected to be some of the default programs loaded onto the phone, encouraging its users to replace Google's familiar Android apps with apps from Microsoft. AllThingsD's sources claim that Nokia's first Android devices are in early manufacturing testing and may arrive early next year. Another Approach Android might sound like an interesting way for Nokia and other manufacturers to produce a cheap, entry-level phone, but Microsoft might have a better way in the near future. According to The Verge, Microsoft is thinking about releasing a free version of Windows Phone and Windows RT. The idea is simple: if device makers can license these operating systems without any upfront costs, they are more likely to produce new Windows Phone and Windows RT devices. Related: Windows Phone Sales Near Double Digits In Key European Markets Microsoft currently makes money by selling licenses for these mobile device operating systems. More than 80 percent of these devices come from Nokia. Once Microsoft finalizes its acquisition of Nokia's handset business, that revenue stream will all but disappear. To make up for the loss in licensing fees, Microsoft is expected to rely on ad-supported apps, similar to Google's strategy. For now, these are just rumors. Plans for the Nokia Android phone or free Windows products have yet to be finalized. Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report. Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ