Chief executive officer of Nokia Corp. denied that there are talks between the phone giant and Microsoft Corp. over potential acquisition of Nokia's hardware business unit by the software developer. The head of the company stresses that the two companies are currently working hard to improve Windows Phone operating system and make it competitive against Android and iOS.

"We will remain in possession of the hardware business. The rumors are baseless. It doesn't make sense when you think about it. Look at the synergies between the companies -- if you sell, you destroy value in the process," said Stephen Elop, chief executive officer of Nokia, at the All Things Digital 2011 conference.

The head of Nokia once again reaffirmed plans to release the company's first smartphone based on Windows Phone platform in the fourth quarter of this year. He admitted that Nokia will need to differentiate its phones from similar devices made by HTC or Samsung, but stressed that the main competitors for Nokia at present are Apple iOS and Google Android eco-systems. The head of the largest mobile phone maker on the globe also admitted that in order to fight the Android and iOS eco-systems, the company will need other manufacturers of WP-based handsets to be successful too, as it attracts software developers to the operating system in general. In general, Nokia will have to find the balance between its differentiation and ensuring that all of the features it can implement into the Windows Phone platform also work on others' handsets.

Back in May rumours transpired that Nokia was about to start negotiations with Microsoft over selling off its mobile phone business to the software giant. The companies were claimed to be looking forward to close the deal, which would make Microsoft one of the world's largest makers of mobile phones on the planet, by the end of 2011.

Nokia has a lot of assets, including patents, technologies, partners and unique capabilities in the mobile phone industry. On the one hand, as the importance of mobile and ultra-mobile devices is increasing, Nokia's assets will only gain in importance. On the other hand, many of Nokia's technologies and capabilities may turn obsolete in the coming years if the company slowdowns development of new solutions as the universe of mobile devices is rapidly evolving.

Earlier this week the company announced that sales of its current Symbian-based and other mobile phones dropped considerable in the second quarter and that the company would miss its guidance. The signal is definitely not good, but clearly Nokia has enough resources to cope with difficulties and gradually switch to Windows Phone operating system. Moreover, Microsoft does not really need to buy Nokia, as in case of the acquisition it will start competing against its current Windows Phone partners, which will kill the platform rapidly. Still, there is no smoke without fire.

Tags: Nokia, Microsoft, Windows Phone