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Despite increased smartphone shipments in the fourth quarter of 2010, Nokia still lost ground to the iPhone and Android in market share — something that hurt the phone manufacturer when it came to operating profit, according to the company’s fourth quarter 2010 earnings report.

But new CEO Stephen Elop has some ideas on how he can turn around Nokia’s fortune. In particular, he hinted in a call with investors that the company may consider adopting a competing operating system in its high-end devices.

Nokia shipped 28.3 million smartphones in the last quarter, an impressive bump from 20.8 million units shipped a year ago and 26.5 million from the previous quarter. But its market share dropped a massive 7 points since the previous quarter to 31 percent — a sign that the release of Microsoft’s Windows Phone 7 platform, as well as increasing success from the iPhone and Android, were significant blows to Nokia’s smartphone presence.

Operating profit dropped to €1.09b (€745 million net) from €1.47 billion (€950 million net) last year. So while Nokia may indeed be shipping more phones, they’re likely lower-end dumbphones and feature phones, both of which are not making the company much money.

The company is still mum on sales numbers of its flagship N8 smartphone, which is a sign that there’s not much good news to report (personally, I sort of hated it). We also reported last week that it canceled the release of its X7 smartphone on AT&T, something that would have been a major step forward for Nokia in the US, and its E7 smartphone has been delayed for some time.

Nokia’s biggest problem right now isn’t hardware, it’s the company’s complete inability to deliver a modern OS that can compete with Apple’s iPhone OS, Android, or even Palm’s floundering webOS. Hype for its upcoming MeeGo OS has been floating around for years, but the company has still failed to deliver anything meaningful on that. So now it has to rely on its aging Symbian OS, which by this point is just a stain on the company’s generally slick hardware.

Perhaps in recognition of its current software deficiencies, Elop mentioned to investors the company’s need to “build or join a competitive ecosystem” — which is a roundabout way of saying that he’s considering Android or Windows Phone 7 Nokia devices. We’ve reported on Nokia’s potential interest in WP7 for months now, and considering Elop came straight from Microsoft, a move in that direction wouldn’t be all that surprising.

Via Engadget, All Things Digital

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