Finance topics

Canada’s economy accelerated more than forecast from October to December on the biggest jump in exports since 2004 and faster consumer spending.

Gross domestic product expanded at a 3.3 percent annual pace in the fourth quarter following a 1.8 percent expansion in the previous three months that was higher than initially estimated, Statistics Canada said today in Ottawa. Economists predicted a 3 percent fourth-quarter gain, according to the median of 23 estimates gathered by Bloomberg News.

The country’s dollar reached a three-year high as the report boosted confidence that Bank of Canada Governor Mark Carney will raise interest rates later this year. Economists predict the key rate will remain 1 percent at tomorrow’s scheduled announcement and rise in the second quarter according to economists surveyed by Bloomberg News.

“There is pretty nice momentum going into the first quarter,” said Jacqui Douglas, a senior economics and currency strategist at TD Securities in Toronto. “It looks like global growth is starting to help Canada,” said Douglas, who predicts a July rate increase.

Canada’s dollar appreciated 0.4 percent to 97.35 cents per U.S. dollar at 9:44 a.m. in Toronto, from 97.74 on Feb. 25. It touched 97.28 cents, the strongest since Feb. 28, 2008. One Canadian dollar purchases $1.0272.

Faster Growth

The June bankers’ acceptance contract yield, which is tied to forecasts about the central bank rate, rose to 1.48 percent today from 1.45 percent on Feb. 25.

Carney told reporters at a G-20 meeting in Paris Feb. 19 that fourth-quarter growth could be faster than the 2.3 percent rate the bank had forecast in January.

Statistics Canada also reported today that the country’s fourth-quarter current account deficit narrowed to C$11 billion from a revised record C$17 billion shortfall. Economists predicted a C$9.7 billion deficit the measure of trade in goods, investment and services. The trade balance swung to a C$523 million surplus from a record deficit of C$6.42 billion in the third quarter, as exports rose and imports fell.

On a monthly basis, gross domestic product rose 0.5 percent in December, the fastest pace in nine months, as oil and gas companies boosted production. Economists forecast a 0.3 percent gain based on the median of 21 responses to a Bloomberg survey.

Boosting Investment

Companies such as Suncor Energy Inc. and Canadian National Railway Co. are boosting investment as the recovery takes hold. Rio Tinto Group, the world’s third-largest mining company, approved a $277 million expansion at its Iron Ore Co. of Canada unit on Feb. 8, to increase output as prices rise.

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Centrue Financial Corp., the parent company of Centrue Bank, received a warning from the Nasdaq stock market for failure to maintain a minimum one dollar per share price.

Centrue (Nasdaq: TRUE) announced in a filing with the SEC today that it received the warning from Nasdaq on Feb. 22. Centrue has until Aug. 22, 2011, to regain compliance with its minimum bid price rule by reaching or surpassing a dollar or higher share price for 10 consecutive days. On Feb. 25, Centrue’s stock closed at 60 cents per share.

“During the grace period described above, the company will consider its alternatives, including whether to apply to transfer its common stock listing to an alternative exchange or inter-dealer quotation system such as the OTC Bulletin Board,” Centrue said in the filing guaranteed high risk personal loans.

It’s the second warning Centrue has received from Nasdaq in recent weeks. In December, Centrue received a delisting warning from Nasdaq for failure to have a minimum market value of $5 million of publicly held shares.

Clayton-based Centrue has 26 bank branches in Missouri and Illinois.

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World stock markets were higher Friday as oil prices eased and Wall Street stabilized after two days of sharp losses amid a political revolt threatening to topple the government of OPEC-member Libya.

Oil prices hovered above $98 a barrel in Asia _ down from $103 the previous day _ after experts said the crisis in Libya may have cut crude supplies less than previously estimated. In currencies, the dollar was higher against the yen and narrowly up against the euro.

European bourses bounded upward in early trading as investors shook off caution over the events in Libya.

Britain’s FTSE 100 rose 0.4 percent to 5,940.75. Germany’s DAX was up 0.2 percent to 7,143.40 and the CAC-40 in Paris rose 0.3 percent to 4,021.59. Wall Street was set to gain, with Dow Jones industrial futures 0.4 percent higher to 12,080 and S&P 500 futures up 0.3 percent to 1,306.80.

Key indexes in Asia closed higher after struggling early in the day to find direction.

Japan’s Nikkei 225 stock average rose 0.7 percent to close at 10,526.76 and South Korea’s Kospi also added 0.7 percent, to 1,963.43. Hong Kong’s Hang Seng index jumped 1.8 percent to 23,012.37 and Australia’s S&P/ASX 200 was 0.6 percent higher at 4,836.50.

The benchmark Shanghai Composite Index was virtually unchanged at 2,878.57, and down 0.7 percent for the week, while the Shenzhen Composite Index edged up less than 0.1 percent to 1,280.30 in lackluster trading.

Huaxin Cement Co., which has seen strong gains recently on expectations of sustained strong demand for construction materials, hit the daily upward limit of 10 percent.

“With the annual session of the national legislature beginning next week, shares are trending with forecasts for the government’s plans. Since the government plans to build more than 10 million low-cost housing units, cement companies saw strong gains,” said Peng Yunliang, an analyst at Shanghai Securities in Shanghai.

Toyota Motor Corp. ended 2.1 percent higher. U.S. investigators closed an investigation into the Japanese automaker after it agreed to recall another 2.7 million vehicles to address accelerator pedals that could become trapped in floor mats or jammed in driver’s side carpeting. That satisfied the Transportation Department that Toyota’s recalls for pedal entrapment were sufficient.

Airline stocks that had sagged after the spike in the cost of crude regained their stride after the International Energy Agency said the rebellion in Libya may have cut oil production less than originally feared. Saudi Arabia also pledged to increase production to make up for any shortfalls. Cathay Pacific Airways Ltd. jumped 3.6 percent, Korean Air Lines vaulted 4.8 percent, and Qantas Airways Ltd. rose 2.1 percent.

But analysts cautioned that the end of the crisis was not yet in sight and that prices will likely spiral upward.

“I think oil prices are going to trade higher, even with Saudi assurances. I think OPEC wants to see higher oil prices,” said Tom Kaan of Louis Capital Markets in Hong Kong. “I am not optimistic on airlines or the transport sector.”

“Oil is pretty much unpredictable, but in the short term, I do not see oil trading back at $85 a barrel. I think the floodgates are open for oil prices” and they could go as high as $120, Kaan said.

Meanwhile, New Zealand’s benchmark retreated 0.1 percent three days after an earthquake in the second-largest city of Christchurch killed at least 113 people.

In New York on Thursday, investors were relieved to see oil prices fall for the first time in nine days.

The Dow Jones industrial average fell 37.28 points, or 0.3 percent, to 12,068.50. The broader Standard & Poor’s 500 index fell 1.30, or 0.1 percent, to 1,306.10. The Nasdaq composite rose 0.6 percent to 2,737.90.

The nation’s gross domestic product rose at a 3.2 percent annual rate in the October-December quarter. The U.S. Commerce Department will update its fourth-quarter estimate later Friday. Economists think the figure will be revised up slightly to 3.3 percent.

In currencies, the dollar rose to 81.94 from 81.77 yen late Thursday. The euro slipped slightly to $1.3802 from $1.3807 following a sharp rise over the past 10 days.

Analysts said the gains in previous days were probably due to expectations that European interest rates would be raised before Federal Reserve Chairman Ben Bernanke does the same in the U.S. Higher rates typically support a currency’s value.

Benchmark crude for April delivery was up $1 to $98.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 82 cents to settle at $97.28 a barrel on Thursday.

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More people bought previously occupied homes in January. But the increase was driven by rising foreclosures and all-cash purchases by investors, while the number of first-time buyers shrank.

Prices sank to their lowest levels in nearly nine years, a troubling sign for the struggling housing sector.

Sales of previously occupied homes rose slightly to a seasonally adjusted annual rate of 5.36 million, the National Association of Realtors said Wednesday. That’s up 2.7 percent from 5.22 million in December.

Still, the pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time home-buyers fell to 29 percent of the market _ the lowest percentage of the market in nearly two years. A more healthy level of first-time home-buyers is about 40 percent, according to the trade group.

Foreclosures represented 37 percent of sales in January. All-cash transactions accounted for 32 percent of home sales _ twice the rate from two years ago, when the trade group began tracking these deals. In places like Las Vegas and Miami, cash deals represent about half of sales.

Millions of foreclosures have forced down home prices, and more are expected this year. The median price of a home sold in January was $158,800. That’s a decline of 3.7 percent from a year ago and the lowest point since April 2002.

“Home prices continue to languish,” said Steven Wood, chief economist for Insight Economics. “Any recovery will be difficult to sustain given the still-large supplies of homes for sale and distressed properties.”

A major barrier for first-time home-buyers is tighter lending standards adopted since the housing bubble burst. These have made mortgage loans tougher to acquire. Banks are also requiring buyers put down a larger down payment. During the housing boom, buyers could purchase a home with little or no money down.

And some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.

With mortgage rates rising, mortgage applications have been volatile. They’re now near their lowest levels in 15 years. Economists say it could take years for home sales to return to healthy levels.

Last year, home sales fell to 4.9 million, the lowest level in 13 years. And even that number, some say, was overstated.

CoreLogic, a real-estate data firm in Santa Ana, Calif., said it’s found that 3.3 million homes were sold last year, far fewer than the National Association of Realtors’ 4.9 million figure. CoreLogic has suggested that the Realtors figure is inflated.

Since 1968, the Realtors group has produced the monthly report on the number of previously occupied homes sold. The group serves as chief advocate and lobbying arm for real estate agents. It says it’s reviewing its 2010 yearly estimate.

One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers fell to 3.38 million units in January. It would take 7.6 months to clear them off the market at the January sales pace. Most analysts say a six-month supply represents a healthy supply of homes.

Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.

For January, sales were up in three of the four regions of the country led by an 7.9 percent rise in the West. Sales rose 3.6 percent in the South, 1.8 percent in the Midwest and down 4.6 percent in the Northeast.

The January increase was driven by a 2.4 percent rise in sales of single-family homes. It pushed activity in this area to an annual rate of 4.69 million units. Sales of condominiums rose 4.7 percent to a rate of 670,000 units.

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Chancellor Angela Merkel’s party suffered its worst defeat in Germany’s richest state since World War II, the first of seven state elections this year that threaten to limit her scope to tackle Europe’s debt crisis.

The loss in Hamburg, the city-state of Merkel’s birth, underscores the challenge she faces trying to balance public opposition to bailouts for debt-wracked states against pressure from investors and fellow euro countries to lead the way in stemming the debt contagion. Merkel faces three more state ballots next month either side of a March 24-25 European Union summit called to form a comprehensive plan for the crisis.

“It’s a warning to Merkel,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “If she has to draw any lesson, it probably will be to get tougher at the European level to show something to German voters,” he said. “There is no room for Merkel to come home from Brussels on March 25 with anything that could look or smell like a defeat.”

Portuguese government bonds declined for a second week before the vote, leading securities of high-deficit countries including Greece lower. The 10-year yield dropped 2 basis points to 7.22 percent at 3:10 p.m. in Berlin today, holding above 7 percent for the 12th trading day in a row.

Peripheral Bond Risk

“There’s a risk to peripheral bonds if Germany is seen not to be displaying support for the countries that are in trouble,” said Orlando Green, assistant director of capital- markets strategy at Credit Agricole Corporate & Investment bank in London. “The market would have been hoping that a deal would have been struck already” before the elections.

Merkel’s Christian Democratic Union took 21.9 percent in yesterday’s election, its worst result in the port city since the first postwar vote in 1946 and half its score in 2008, preliminary results showed. The Social Democrats, the main national opposition party, took 48.3 percent, enough to end the CDU’s 10-year rule in Hamburg and form a majority government without need of a coalition partner.

“We have to acknowledge that this was a stinging defeat,” Merkel told reporters in Berlin today. Outgoing CDU Mayor Christoph Ahlhaus said the results were “painful,” and congratulated his Social Democratic opponent Olaf Scholz, a former Labor Minister in Merkel’s first-term government.

‘Massive Collapse’

The CDU suffered “a massive collapse of support in this booming city that must set off hand-wringing in Berlin,” said Hans-Juergen Hoffmann, managing director of Hamburg-based pollster Psephos. “Merkel will surely be concerned now that this disaster won’t be repeated in upcoming state elections.”

German state ballots follow in Saxony-Anhalt, Bremen and Mecklenburg-Western Pomerania, home to Merkel’s electoral district, and culminate in Berlin in September. A double-header looms next month in Rhineland-Palatinate and Baden-Wuerttemberg, the southwestern state ruled by her party for more than half a century. Both votes are on March 27, two days after the EU summit, in a “Super Sunday” for Merkel, Brzeski said.

In Hamburg, the Greens took 11.2 percent and the Free Democrats, Merkel’s national coalition partner, 6.6 percent, enough to win seats in the state parliament for the first time since 2004. The anti-capitalist Left Party won 6.4 percent.

Greece Blame

Hamburg was the first electoral test of Merkel’s policy since her party lost a state election last May, a result that she blamed on voter anger over bailing out Greece. The defeat cost her control of parliament’s upper house in Berlin, the Bundesrat, where regional administrations are represented. The Hamburg result, if confirmed, would cost the CDU 3 seats in the Bundesrat, further limiting her ability to pass legislation.

Merkel’s main European policy challenge this year is getting the EU debt-fighting deal through parliament and “for her, Baden-Wuerttemberg is the test,” said Holger Schmieding, chief economist at Joh Berenberg Gossler & Co. in London.

Germany, Europe’s largest economy, is already the biggest country contributor to last year’s 110 billion-euro ($151 billion) bailout of Greece and the rescue fund for debt-stricken states.

Merkel’s room to maneuver is also curtailed by her FDP coalition partner as it seeks to counter waning support. The FDP resists any attempt to top up the rescue fund, make it more flexible or relax the terms of bailout aid. It also insists that parliament has a say in any attempt to provide more aid.

While the CDU “can live” with the defeat in Hamburg, “for the FDP, it’s a good result after some very weak opinion polls,” said Schmieding. “A party less wounded is more able to make a deal.”

The Christian Democrats went into the Hamburg vote after a spate of negative headlines for Merkel. Axel Weber, her candidate to be the European Central Bank’s next head, dropped out of the race on Feb. 11 in what the best-selling Bild newspaper called “a blow to the chancellor and to the euro.” Defense Minister Karl-Theodor zu Guttenberg, Germany’s most popular politician, is denying allegations that he stole parts of his doctoral thesis.

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Witnesses in Ivory Coast say an opposition meeting was disrupted by security forces loyal to the incumbent leader who refuses to cede power.

Witnesses said military police arrived as the meeting was being set up Saturday by supporters of Alassane Ouattara, who was internationally recognized as the winner of November’s presidential poll. Witnesses say police fired tear gas and live rounds into the air before setting fire to the podium.

Ouattara’s prime minister called on followers this week to take to the streets in an Egypt-style uprising against incumbent leader Laurent Gbagbo free business cards. Gbagbo declared a nationwide curfew on Friday through the weekend.

The international community had said it would use financial sanctions to dislodge Gbagbo.

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Emerging economies such as China and Russia are resisting efforts by the world’s richest economies to include income flows between countries in early-warning indicators that aim to gauge risks to the global economy.

Finance ministers and central bankers from the G-20 are meeting today and tomorrow in Paris seeking an agreement on the use of economic indicators to monitor the skewed trade and financial flows that pitched the world into crisis.

“We don’t have the right to ignore the red line of others,” French President Nicolas Sarkozy said in a speech to officials at the Elysee Palace. “But we must aim for more coordination despite our respective red lines.”

Canadian Finance Minister Jim Flaherty told reporters in Paris that there seems to be a “general agreement” among Group of 20 countries on using public debt and private savings data as indicators, while differences remain on invoking a current account measure that tracks income flows between countries. Flaherty said China, the world’s second-biggest economy, has “its own view” on the matter.

“We should try to have an agreement,” Flaherty told reporters. “It’s a very important first step.”

Policy makers are trying to avoid a repeat of the last expansion when U.S. consumers relied on borrowing from abroad to finance their purchases, contributing to an export boom from Asia. As China and other Asian nations accumulated dollars from trade surpluses, they bought U.S. Treasury debt and depressed global yields. Lower borrowing costs helped stoke the U.S. housing and credit booms that later turned to bust.

Seoul Agreement

While G-20 governments failed to agree on shrinking current-account shortfalls during a meeting in Seoul last November, they decided to find a set of “indicative guidelines” designed to identify large imbalances and seek actions needed to fix them.

Debt and deficits, as well as the size of foreign exchange reserves, savings ratios and growth differentials, are among the indicators that host French Finance Minister Christine Lagarde put up for discussion at the Paris meeting.

Canada’s Flaherty said an agreement this week by finance officials would allow the G-20 to begin work on “guidelines” that could be agreed to at their next meeting scheduled in Washington in April.

Russian Deputy Finance Minister Dmitry Pankin said that efforts by some countries to include indicators of capital reserves may stand in the way of an agreement quick guaranteed personal loans. “If the U.S. and the U.K. will put an amount of reserves as a kind of indicator, that’s our biggest concern,” he told reporters.

U.S. Treasury Secretary Tim Geithner predicted that governments will still move toward taking into consideration both external and domestic indicators.

‘No Alternative’

“You have to look at measures of imbalance,” he said at an event in Paris today. “There’s no alternative.”

Countries should consider measures of external imbalances, like current account, as well as internal measures, Geithner said. `I’m sure you’ll see the world move in that direction,” he said.

German Deputy Finance Minister Joerg Asmussen said that a “vast majority” of countries support the approach of a more comprehensive list of indicators.

“In order to assess whether a country is in balance or unbalanced, we as Germany strongly think that you cannot rely on a single indicator in assessing this, but you need a set of indicators to assess your economic situation,” Asmussen in a Bloomberg Television interview with Francine Lacqua.

Current Account

European Union officials want the scorecard to include the current-account balance, public deficit and debt, savings ratio, net foreign assets, reserve adequacy, real effective exchange rate and private date, according to an EU position paper.

The U.S. current-account deficit widened to $127.2 billion in the third quarter, the biggest in almost two years, as imports rose. The current account is the broadest measure of international trade that includes income payments and government transfers.

China, which overtook Japan as the world’s second-biggest economy last year, reported a smaller-than-forecast January trade surplus of about $6.5 billion, the smallest in nine months.

Flaherty said the “private financial position” indicator will include measures of private- sector savings and debt, while a “public financial position” indicator will be captured by government debt and deficits. An agreement on private and public debt indicators appears “likely,” while a pact on the current account measure faces more “difficulty,” he said.

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The Federal Reserve earned $13 billion in interest and fee income on its liquidity programs from August 2007 until December 2009, according to the New York Fed.

The facilities generated $20 billion in interest and fees before taking into account the $7 billion cost of funds, Michael Fleming and Nicholas Klagge, staff members at the New York Fed said in a paper released today. The period between August 2007 and December 2009 represents the time the facilities were used the most, the paper said.

The central bank’s payments to the U.S. Treasury rose 65 percent last year to a record $78.4 billion on increased income from mortgage and Treasury securities it bought to boost economic growth. The figure was based on preliminary unaudited results and released last month. The Fed remitted $47.4 billion in 2009.

The Obama administration projected in its budget that the Fed’s payments to the U.S. government will peak this year and decline each of the next four years, approaching levels from before the financial crisis.

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China’s imports of foreign cars nearly doubled last year, with Japanese and German models most in favor among buyers looking to upgrade their vehicles, an industry association said Tuesday.

The quasi-official China Association of Automobile Manufacturers said car imports jumped 93 percent last year from 2009 to 813,600 vehicles. By value, imports doubled to $30.64 billion, while China’s vehicle exports rose 40 percent from a year earlier to a record $51.8 billion.

An explosion in demand and sluggish sales in the recession-stricken West helped China overtake the U.S. as the largest car market by sales of new vehicles in 2009. Last year, sales of passenger cars, excluding large buses, jumped by a third to 13.7 million vehicles.

While domestic-made models of foreign joint ventures dominate the market, demand for higher-quality imports remains strong.

Imports of SUVs led the market at 351,400 vehicles, up 69 percent from 2009, while imports of sedans more than doubled to 343,700, the report said. Imports also more than doubled, to 89,900.

Despite a spate of safety-related recalls by Japanese manufacturers, imports from Japan accounted for the largest share, followed by Germany, South Korea and the United States.

China’s auto exports are mainly buses, trucks and knockdown kits for assembly overseas, sold by domestic manufacturers to developing countries.

So far, exports of made-in-China vehicles, especially by foreign joint ventures, have been limited, partly due to the struggle to keep up with surging local demand. Last year they accounted for less than 3 percent of the 18.3 million vehicles produced in China, far behind South Korea, Thailand, India and Brazil.

Passenger car sales slowed in January as tax breaks for energy-efficient cars lapsed and cities began tightening curbs on vehicle use to help combat traffic congestion and smog, according to the Shanghai-based China Passenger Car Association.

It reported Monday that sales of passenger cars fell 10.3 percent in January from the month before to 965,238 vehicles. On an annual basis, sales rose 12.6 percent.

Weaker demand inside China would likely spur efforts to export more to other fast-growing markets, though rising costs for labor and materials already are already eroding its price competitiveness.

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Nokia CEO Stephen Elop announced Friday that the Finnish mobile phone maker would make a radical shift in its business strategy, highlighted by a switch to Microsoft’s Windows Phone 7 smartphone platform.

Elop, who joined Nokia in September after heading Microsoft’s business division for the two years, spoke about the company’s future at a strategy conference held in London. The announcement comes in the wake of a memo he sent to Nokia employees earlier this week in which the CEO described the company as standing on a "burning platform." Nokia will die if it does not change the way it does business, he said.

The company’s new strategy includes a management shakeup, a significant number of layoffs, and a realignment of its business units. But the boldest change is its embrace of a third-party smartphone platform in Windows Phone 7 — a major strategic shift for Nokia and a giant coup for Microsoft (MSFT, Fortune 500).

Investors weren’t too pleased with the plan. Shares of Nokia (NOK) fell 12% on Friday.

Elop, however, argued the partnership would once again make Nokia a world-class smartphone company.

"Consumers want compelling mobile products, which include not only the device, but the software," Elop said during the news conference. "Nokia and Microsoft will combine our strengths to deliver an ecosystem with unrivalled global reach and scale. It’s now a three-horse race."

The other two "horses" that Elop was referring to are Apple’s iPhone and Google’s Android smartphone platforms. Nokia’s Symbian smartphone operating system is currently the No. 1 smartphone platform in the world, with about 200 million customers. But its market share is rapidly diminishing, and it it has struggled to keep up with the pace of innovation set by Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500).

Windows Phone 7, though just four months old, already has more apps in its app store than Symbian. Microsoft’s new mobile OS has gotten off to a somewhat slow start, but both the Nokia ’sand Microsoft’s CEOs said they believe that a partnership will leverage the two companies’ core competencies — Microsoft’s software and Nokia’s hardware and distribution — to win in the smartphone space.

"The partnership announced today provides incredible scale, vast expertise in hardware and software innovation and a proven ability to execute," said Steve Ballmer, Microsoft’s CEO, who also appeared at the London conference.

Goodbye Symbian and Intel, hello Windows

Nokia has forever put its own smartphone operating system, Symbian, on its devices. It had also been working on a second OS, MeeGo, in partnership with Intel (INTC, Fortune 500), though that launch was perpetually delayed.

Elop said the company’s "principal smartphone strategy" will revolve around Windows Phone 7 cash advance loan. Symbian will become a "franchise platform," and the company expects to sell 150 million more Symbian devices over the next several years as it transitions to Windows Phone 7.

For Nokia, the partnership with Microsoft could finally get it through the door in the United States, a market the world’s bestselling phone maker has struggled to crack. Elop said Nokia would have trouble distinguishing itself from its competitors if it partnered with Google rather than Microsoft.

"There are no heroics in being the 20th Android phone at Best Buy," said Dan Hays, director at consultancy PRTM. "Going ahead with Windows Phone 7 could actually serve as a differentiator for Nokia in the marketplace. No other major mobile phone developer has really stepped forward to embrace Windows Phone 7 in a big way."

For Microsoft, Hays said the partnership with the world’s largest smartphone maker legitimizes its smartphone platform. Landing Nokia as a partner will also greatly increase its sales: Manufacturers have shipped only 2 million Windows Phone 7 smartphones in the past four months, while Apple and Google are activating upwards of 300,000 iPhones and Android phones each day.

Nokia’s MeeGo partnership will continue as an "open-source mobile operating system project" that focuses on longer-term exploration of next-generation devices, Elop said, though he also promised that a "MeeGo-related product" will ship later this year.

In a press release, Nokia referred to MeeGo "computers," perhaps suggesting that the OS will not appear on smartphones but on tablets or netbooks.

Strategy shift

Abandoning Symbian and sidelining MeeGo are risky moves: Nokia has devoted tremendous time and resources to improving its Symbian software, and its Intel/MeeGo partnership has been very high profile. The yet-to-be-released MeeGo has a growing wave of developer support and momentum behind it, and Symbian remains popular with its users.

But by embracing Microsoft’s Windows Phone 7 operating system, Nokia could follow in the footsteps of a company like Motorola (MMI), which struggled to make a winning device to replace its top-selling RAZR until it adopted a third-party operating system, Android, for its Droid smartphone.

Nokia held a 33% share of the smartphone market in 2010, according to IDC, down from 39% in 2009 and 48% in 2006 — the year before Apple unveiled its iPhone.

Nokia’s declining market share, product delays and the general sense that the company lacks a clear strategy have sent shares plummeting 73% since their 2007 peak. 

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