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Nokia-Lumia-925As Nokia works to complete the sale of its devices and services division to Microsoft, the company is also moving towards the announcement of a new Android smartphone, according to a report by the Wall Street Journal. That means Microsoft could be making even more money on Android hardware if the new handset takes off, beyond the patent royalties already collected by the company..

According to the report, the phone will run a forked version of Android, and won’t include the Google Play Store, or Google’s other apps. Instead, taking a page out of Amazon’s book, it will use Nokia’s own proprietary app store, and come pre-installed with applications from Nokia and Microsoft, including Here Maps and Mix Radio. The new handset will reportedly be revealed at Mobile World Congress in Barcelona later this month.

While Microsoft using Android in its hardware may seem like an odd choice, the new phone could be a ticket into emerging markets, which are currently dominated by low-cost Android smartphones. Windows Phone 8 isn’t a great choice for a budget handset because it requires higher-end hardware.

Last month, a rumor surfaced that claimed Microsoft was working on a smartphone that users could purchase to run Android or Windows Phone. This rumored handset could be the beginning of a Nokia-branded Android fork, which could in turn help make a dual WP8/Android phone a reality.

One of the benefits of having Microsoft’s backing is that Nokia won’t have to license patents that Microsoft claims Android violates. Currently, Android patent licensing is a significant contributor to Microsoft’s mobile revenue.

This news comes on the heels of Nokia’s announcement last week that it has settled all of its outstanding patent litigation with HTC, and the two companies have entered into a pact to share patents.

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