Nokia, struggling against Android, looks to Windows Phone this year

Nokia this morning dropped a bomb with new sales forecasts “substantially below” its previous expectations for the current quarter. The mobile giant, led by former Microsoft executive Stephen Elop, blamed factors including “competitive dynamics and market trends across multiple price categories” that have lead to “lower than previously expected average selling prices and mobile device volumes.”

Translation: Google’s Android having a major impact, with well-received phone rollouts in Europe and new progress in China. Barron’s Tech Trader Daily has a good roundup of analysts’ reaction to the news.

Elop pointed to Nokia’s progress toward Microsoft’s Windows Phone 7 almost as if it were a light at the end of the tunnel.

Nokia's Stephen Elop and Microsoft's Steve Ballmer. (Credit: Microsoft)

“Strategy transitions are difficult. We recognize the need to deliver great mobile products, and therefore we must accelerate the pace of our transition,” he said in the news release. “Our teams are aligned, and we have increased confidence that we will ship our first Nokia product with Windows Phone in the fourth quarter 2011.”

That timing coincides with the scheduled release of the next version of Windows Phone, code-named Mango. Microsoft said last week that the first Windows Phone devices from Nokia would be running the new version of the operating system.

Lower sales from Nokia translates into bad news for Microsoft, which is counting on the mobile giant’s market strength to boost Windows Phone sales. Nokia’s stock dropped more than 15 percent on the news this morning.

Microsoft is using its patent portfolio in an attempt to level the playing field with Android devices, seeking licensing fees from Android phone manufacturers based on its claims that Google’s operating system violates its intellectual property.